Stephen Spielberg would like to send his parents on a cruise for their 25th wedding anniversary.He has priced the cruise at $15,000 and he has 5 years to accumulate this money.How much must Stephen deposit annually in an account paying 10 percent interest in order to have enough money to send his parents on the cruise?
A)$1,862
B)$2,457
C)$3,000
D)$2,234

Question

Quizplus · Accepted Answer

To calculate the annual deposit, we need to use the formula for the future value of an annuity:

FV = (PMT x ((1 + r)^n - 1)) / r

Where PMT is the annual deposit, r is the annual interest rate, and n is the number of years.

Plugging in the given values, we get:

$15,000 = (PMT x ((1 + 0.1)^5 - 1)) / 0.1

Simplifying this equation, we get:

PMT = $2,457.04

Therefore, Stephen needs to deposit $2,457 annually to accumulate enough money to send his parents on the cruise. The correct answer is B).

Stephen Spielberg Would Like to Send His Parents on a Cruise