Abby Mia wants to know how much must be deposited in her local bank today so that she will receive yearly payments of $18,000 for 20 years at a current rate of 9% compounded annually. (Use the tables found in the textbook.)
We are not given tables, so will just use the amortization formula. [tex]P=\frac{A*((1+i)^n-1)}{i*(1+i)^n}[/tex] where P=amount to be deposited today, to be found A=amount withdrawn each year=18000 i=Annual interest=9% n=number of years = 20
Substituting values, [tex]P=\frac{A*((1+i)^n-1)}{i*(1+i)^n}[/tex] [tex]=\frac{18000*((1+0.09)^{20}-1)}{0.09*(1+0.09)^{20}}[/tex] =164313.82 to the nearest cent
