You must make a payment of $1,432.02 in 10 years. To get the money for this payment, you will make five equal deposits, beginnin

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You must make a payment of $1,432.02 in 10 years. To get the money for this payment, you will make five equal deposits, beginnin

g today and for the following 4 quarters, in a bank that pays a nominal interest rate of 12% with quarterly compounding. How large must each of the five payments be?

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Katen [3.5K] · Answer 1 · 2026-04-07T23:13:35+03:00

To meet the payment of $1,432.02 due in 10 years, each bank deposit must be $94.19. This involves making five equal contributions starting today and following through for the next four quarters at a nominal interest rate of 12%, compounded quarterly. First, we calculate the present value one year from today of $1,432.02 using the formula PV = FV / (1+i)^n. Here, n = 9*4 = 36 and i = 0.12/4 = 0.03. This yields PV = $1,432.02 / 1.03^36 = $494.09, the monetary amount required to accumulate one year from now for the ultimate goal of $1,432.02 in the future. Now, using the formula FV = {A*[(1+i)^n-1]}/i to isolate A, we have A = (494.09*0.024) / [(1.024^5)-1] yielding A = $94.19.