How much invested today will grow in the same amount of money in 25 years that $500 invested at the end of each year for the next 25 years will grow into given the annual rate of 6%?
First we will use a BA 2 plus Financial calculator to calculate the Future value of our periodic investments of $500-
N(Number of years) = 25
PMT(Investment per period) = $500
I/Y(Interest rate) = 6%
Amount accumulated after 25 years = $27,432.256
To calculate the amount of investment to be made today that will grow in the same amount of money in 25 years as $500 per year, we will calculate the PV of the Amount accumulated after 25 years
PV = $27,432.256 / (1.06^25) = $6391.678
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