Question
Suppose you have set a specific goal for the balance in your savings account 12 years from today. You have been making year-end deposits of
Suppose you have set a specific goal for the balance in your savings account 12 years from today. You have been making year-end deposits of $2,000 per year for the past 8 years, and this annual deposit (if continued for 12 more years) would have been sufficient to reach your goal under the 10 percent average annual interest rate (annual compounding) that you have been receiving. However you believe that the average annual interest rate on your deposits will be only 9 percent per year compounded annually over the remaining 12 years of the investment period. If your goal remains unchanged, you must adjust your annual deposit to reflect this new interest rate. Assuming that your next deposit will be made one year from today, what must be the amount of each of the remaining 12 deposits in order to reach your original goal?
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