The Kellys are planning for a retirement home They estimate

The Kellys are planning for a retirement home. They estimate they will need $200,000 4 years from now to purchase this home. Assuming an interest rate of 10%, what amount must be deposited at the end of each of 4 years to fund the home price? (Round to two decimal places.)

Solution

Answer Let suppose yearly amount to be deposited= K YEAR Opening balance(O.B.) (a) Yearly amount Deposited (b) Interest 10%XO.B. (c) Closing Balance (a+b+c) 1 - K - K 2 K K 0.1 K 2.1K 3 2.1K K 0.21K 3.31K 4 3.31K K 0.33K 4.64K Now, 4.64 K = $ 200,000 K = $ 200,000/4.64 =   $43,103.45 Since yearly amount of $ 43,103.45 should be deposited to get $ 200,000 at end of 4 year with interest rate of 10 % yearly. Please feel free to ask if anything about above solution in comment section of the question.