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

Question

Quizplus · Accepted Answer

We can use the formula for the future value of an annuity:

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

Where:

FV = Future value
PMT = Annual deposit
r = Annual interest rate
n = Number of years

Plugging in the given values, we get:

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

Solving for PMT, we get:

PMT = $2,457.10

Therefore, Janice must deposit $2,457.10 annually in order to accumulate enough money to send her parents on the cruise. The answer is B.

Janice Would Like to Send Her Parents on a Cruise