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A ski chalet at Peak n' Peak now costs $250,000. Inflation is expected to cause this price to increase at 5 percent per year over the next 10 years before Chris and Julie retire from successful investment banking careers. How large an equal annual end-of-year deposit must be made into an account paying an annual rate of interest of 13 percent in order to buy the ski chalet upon retirement

Respuesta :

Answer:

$22,108

Explanation:

The computation is shown below:

Required deposit each year (P) = FVA ÷ ([(1+rate of interest)^number of years-1]÷rate of interest)

= $407,224 ÷ (((1+13%)^10-1) ÷ 13%)

= $22,108

The $407,224 comes from

= $250,000 × (1+5%)^10

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