The company wants to have enough cash invested at December 31, 2021, to provide for all three employees. To accumulate enough cash, they will make three equal annual contributions to a fund that will earn 11% interest compounded annually. The first contribution will be made on December 31, 2018. Compute the amount of this required annual contribution.

Instructions are listed below.

Explanation:

Giving the following information:

The company wants to have enough cash invested on December 31, 2021, to provide for all three employees. To accumulate enough cash, they will make three equal annual contributions to a fund that will earn 11% interest compounded annually.

We were not provided with enough information to calculate the annual deposit needed, but, I will provide with the formula and a small example:

To calculate the annual deposit we need to use the following formula:

FV= {A*[(1+i)^n-1]}/i

A= annual deposit

Isolating A:

A= (FV*i)/{[(1+i)^n]-1}

For example:

The amount of money needed for December 31, 2021, is $100,000.

A= (FV*i)/{[(1+i)^n]-1}

FV= 100,000

i= 0.11

n= 3

A= (100,000*0.11) / [(1.11^3)-1]= $29,921.31