Question

You want to start your own business. You estimate you can earn 7% on your investments...

You want to start your own business. You estimate you can earn 7% on your investments and will need $450,000 in year 12 if you want to give your business a good foundation. You currently have $30,500 available towards your investment. You believe you can save $14,000 each year starting now. You plan on taking a special trip with your family to celebrate your parents' 50th anniversary in at the end of year 7 and will skip the savings that year. How far below or above your goal will you be?

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Answer #1
INTEREST RATE 7%
NO OF YEARS 12
1 REQUIRED FUTURE VALUE 450000
2 AMOUNT CURRENTLY AVAILABLE 30500
3 YEARLY SAVINGS 14000
FUTURE VALUE FACTOR(7%,12) 2.2522
FUTURE VALUE ANNUITY FACTOR(7%,12) 17.8885
NOTE:IN YEAR 7 THERE WILL BE NO SAVINGS
FUTURE VALUE FACTOR(7%,12-7) 1.0426
4 FUTURE VALUES OF INVESTMENT                =(30500*2.2522)+(14000*17.8885)-
(14000*1.0426)
= 304626.2
ADDITIONAL INVESTMENT REQUIRED IS 145373.8
I.E., 450000-304626.8
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