Computation of the value of the annuity payment
Suppose you have decided to start saving money to buy a motorcycle for your loving spouse's 40thbirthday, which is five years away. You estimate the amount you will have to pay at that time will be $6,000. The savings account you established for the gift offers 16% per annum interest compounded quarterly.
How much will you have to deposit each year if your first deposit is made one year from today and the final deposit is made one year before the motorcycle is purchased?