Question

1. Mike wants to invest money every month for 40 years. He would like to have
$1 000 000 at the end of the 40 years. For each investment option, how
much does he need to invest each month?
a) 10.2%/a compounded monthly
b) 5.1%/a compounded monthly

2. Kenny wants to invest $250 every three months at 5.2%/a compounded
quarterly. He would like to have at least $6500 at the end of his investment.How long will he need to make regular payments?

8.4 Annuities: Future Value

Answer 1

a)FV=1,000,000
i=10.2/12= 0.85= 0.0085
n=40•12=480
FV=R[(1+i)^n-1/i)
1000000=R[(1.0085)^480-1/0.0085]
R=1000000/[(1.0085)^480-1/0.0085]
R=148.77
b)FV=1000000
i=5.1/12=0.425=0.00425
n=480
R=1000000/[(1.00425)^480-1/0.00425]
R=638.38