I am wanting to buy new furniture, I need to save up $10,000 by the end of 3 years to get the furniture I want. I have $2500 save up already, I want to make equal year end deposits, and also the account pays 8% interest. How much should payments be?
by 
PattyPat
ANSWERS: 2
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slightly less than 2095 per annum given the compounding interest. eg 2500 already saved + 8% = 2700 + 2095 = 4795 + 8% = 5178.6 + 2095 = 7273.6 + 8% = 7855.488 + 2095 = 9950 + 8% = 10746.53 you take it from there :)
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I think I've seen a formula for this sort of thing; you may find it on the internet if you look. Here's one way of doing it. There are four deposits to be considered: (a) $2500 today, which will accumulate 1.08^3 interest (b) $x end yr 1, which will accumulate 1.08^2 interest (c) $x end yr 2, which will accumulate 1.08^1 interest (d) $x end yr 3, which will accumulate no interest Therefore [2500*(1.08^3)] + [x*(1.08^2)] + (x*1.08) + x = 10,000 [2500*(1.08^3)] + {x*[(1.08^2)+(1.08)+1]} = 10,000 (2500 * 1.26) + [x * (1.17+1.08+1)] = 10,000 3150 + 3.25x = 10,000 3.25x = 6850 x = 2107.69 All decimals were rounded to two significant digits.
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