Final answer:
To calculate the minimum funding amount for an annuity, we can use the present value formula for an annuity. Using this formula with the given values, we can determine the approximate minimum amount needed to fund the $800 monthly payments for 20 years at a 3% interest rate.
Step-by-step explanation:
To calculate the minimum amount necessary to fund the $800 monthly payments for a 20-year period, we need to use the formula for the present value of an annuity. The formula is:
PV = PMT × [(1 - (1 + r)^-n) / r]
where PV is the present value, PMT is the monthly payment, r is the monthly interest rate, and n is the number of months. In this case, the monthly payment is $800, the interest rate is 3% (or 0.03 as a decimal), and the number of months is 20 years × 12 months = 240 months.
Using the formula, we can calculate the present value:
PV = $800 × [(1 - (1 + 0.03)^-240) / 0.03]
Calculating this expression will give us the minimum amount necessary to fund the payments.