A person decides to deposit a constant amount P at the begin of each of the next 28 years, with a constant interest rate 9% per year compounded yearly. For year 30 th, the person desires to withdraw 650 MVND for spending. For the years after (from year 31 th) until year 73 th, the yearly amount withdrew increases by 3% annually to avoid the effect of inflation. Note that no money left over after year 73 th. To obtain this goal, what is the value of P in MVND?
(the answer is 80.693698452872, please find the solution)



Answer :

Given:

Compound interest for the 3rd year = Rs.

Rate of interest = 10%

Concept used:

Tree method

Calculation:

Let the principal be Rs. x

So, for 2nd and 3rd year principal be 2x and 3x

According to the question,

x/10

2x/10 x/100

3x/10 3x/100 x/1000

(3x/10 + 3x/100 + x/1000) = 1158.50

⇒ (300x + 30x + x)/1000 = 1158.50

⇒ 331x = 1158500

⇒ x = 3500

⇒ The principal = Rs. 3500

∴ The sum he has deposited each year is Rs. 3500