(Q. 5 IN B) YOU ARE PLANNING TO MAKE A PURCHASE WORTH $1 MILLION I...

10. (Q. 5 in B) You are planning to make a purchase worth $1 million in 9 years. To meet this goal, you need to draw up a savings plan. The problem is that you won’t be able to make any deposit towards this savings goal in Years 3 and 7 from now. How much is the equal amount that you have to deposit at the end of each year over the 9 years to come (other than Years 3 and 7) in order to finance your planned purchase? The interest rate is 7.8% compounded annually. A) $80,750.66B) $103,601.18 C) $104,931.79 D) $105,938.94 Solution B These deposits are a 9-year ordinary annuity with two missing cash flows that occur at the end of Years 3 and 7. The future value of these cash flows can be calculated as: × +

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