Your company must make payments of $100,000 each year for 10 years, with the first payment to be made 10 years from today.To prepare for these payments, your company must make 10 equal annual deposits into an account whic pays a simple interest rate of 7 percent, daily compounding (360-day year).Funds will remain in the account during both the accumulation period (the first 10 years) and the distribution period (the last 10 years), and the same interest rate will be earned throughout the entire 20 years.The first deposit will be made immediately.How large must each deposit be?
A)$47,821.11
B)$49,661.86
C)$51,234.67
D)$52,497.33
E)$53,262.39

Question

Quizplus · Accepted Answer

The problem involves calculating the present value of an annuity due to the daily compounding interest rate. The future value of the deposits must equal the present value of the payments. Using the formula for future value with daily compounding and solving for the deposit amount, option B is the correct answer.

Your Company Must Make Payments of $100,000 Each Year for 10