Unformatted text preview: for PMT. Isolating PMT on the left side of the equation gives us
FVIFAi,n (4.23) Once this is done, we have only to substitute the known values of FVAn and
FVIFAi,n into the right side of the equation to find the annual deposit required.
FV 5 N
I 6 CPT As just stated, you want to determine the equal annual end-of-year deposits
required to accumulate $20,000 at the end of 5 years, given an interest rate
Table Use Table A–3 indicates that the future value interest factor for an
ordinary annuity at 6% for 5 years (FVIFA6%,5yrs) is 5.637. Substituting
FVA5 $20,000 and FVIFA6%,5yrs 5.637 into Equation 4.23 yields an annual
required deposit, PMT, of $3,547.99. Thus if $3,547.99 is deposited at the end of
each year for 5 years at 6% interest, there will be $20,000 in the account at the
end of the 5 years. PMT
3547.93 Calculator Use Using the calculator inputs shown at the left, you will find the
annual deposit amount to be $3,547.93. Note that this value, except for a slight
rounding difference, agrees with the value found by using Table A...
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