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g . A condominium in Maui now costs $500,000. Inflation is expected to cause this price to increase at 8 percent per year over the next 5 years before you retire from your CFO position in a Big 4 company. How large an equal annual end-of-year deposit must be made into an account paying an annual rate of interest of 12 percent to buy the condominium upon retirement?

Respuesta :

Answer:

$115,643

Explanation:

The condo is now valued at $500,000

--> Future value (FV) of the condo in 5 years in 500,000 x 1.08^5 = $734,664

n = 5 years

i/r = 12%

Present value (PV) of the deposit now = 0 (no deposit has been made)

PMT (Amount of annual deposit need to be made) = ?

In order to find PMT, we need to input all the above info into financial calculator.

PMT = $115,643

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