Question

Kelly wants to save $20,000 by December 31, 2025. She plans to invest level annual payments every December 31, starting in 2020. If she expects to earn 4.5% interest, find her minimum annual payment to meet her goal.

Answer 1

Kelly's Goal is $20000 in 6 years(2020 Dec 31 to 2025 Dec 31 ) and her expected interest rate is 4.5%

If she invest $3333.33333333 per year she can achieve her goal (3333.33333333*5=20000)

The expected interest rate = 4.5%

So she doesn't required to invest $3333.33333333 fully per month.

She required to invest $3333.33333333-( 4.5% of $3333.33333333)

That is $3333.33333333-($3333.333*4.5/100)

   =$3333.33333333-$150= $3183.3333333 per month

here $3183.33333333 is her annual investment and 150 is her expected interest (3183.33333333+150=3333.33333333)

So kelly wants to invest $3183.33333333 per year with a interest rate of 4.5 ($150) to achieve her goal