Question

Viviana Carroll needs to have $25,000 in five years. If she can earn 8 percent on any investment, what is the amount that she will have to invest every year at the end of each year for the next five years? (Round to the nearest dollar.)

Answer 1

She will have to invest $4,261.41 every year at the end of each year for the next five years.

Step-by-step explanation:

Use Following formula to calculate the monthly payment required.

FV = P x [ ( ( 1 + r )^n ) - 1 ) / r ]

FV = Future Value = $25,000

R = RATE OF RETURN = 8%

N = NUMBER OF YEARS = 5 YEARS

P = Monthly Payment = ?

$25,000 = P x [ ( ( 1 + 0.08 )^5 ) - 1 ) / 0.08 ]

$25,000 = P x [ ( ( 1.08 )^5 ) - 1 ) / 0.08 ]

$25,000 = P x 5.8666

P = $25,000 / 5.8666

P = $4,261.41