Final Exam Study Guide Problem 10 Solution

In this problem, you compute the payment on an ordinary annuity using

final_study_guide_soln_10a

Problem 10 The Central Yavapai Fire District wants to take advantage of a state program to save money to purchase a new fire truck. The truck will cost $400,000. To save for the truck, the district will make a monthly deposit into an ordinary annuity paying 10.8% annual interest. If they wish to have the money for the purchase in 60 months, how much should each payment into the annuity be?

Solve final_study_guide_soln_10afor PMT with FV = 400000, n = 60, and  i = .108/12:

final_study_guide_soln_10b

This gives a payment of 5057.13.