Question

Steve Madison needs $212800 in 10 years.

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How much must he invest at the end of each year, at 10% interest, to meet his needs?

Answer 1

Ans : Future value (FV) = $ 212,800

Present value Annuity = ?

n = 10 years = number of years

r = rate of interest = 10%

Present value Annuity = Future value / Future value annuity factor ( 10%,10 years)

= Future value / [1 + (1.1) + (1.1)² + - -- - - + (1.1)⁹}

= $ 212,800 / 15.93742 (see note 1 below)

= $ 13,352.22

Note 1 :

1	1
1.1	1.1
(1.1)^2	1.21
(1.1)^3	1.331
(1.1)^4	1.4641
(1.1)^5	1.61051
(1.1)^6	1.771561
(1.1)^7	1.948717
(1.1)^8	2.143589
(1.1)^9	2.357948
	15.93742