Question

How much do you need to invest every month in an annuity to

Answer 1

Answer:

A=25000 is the future value. P the value that we need to invest. r= 0.04 represent the interest rate in fraction. n = 12 represent the number of times that the rate is compounded in a year. t = 5 years.

If we solve for the value of P we got:

$P= \frac{A}{(1+ \frac{r}{n})^{nt}}$

And replacing we got:

$P= \frac{25000}{(1+ \frac{0.04}{12})^{12*5}} =20475.078$

And rounded to the nesrest penny we need to invest $20475.08 in order to have after 5 years $25000

Step-by-step explanation:

For this case we can use the future value with compound interest given by:

$A = P (1+ \frac{r}{n})^{nt}$

Where:

A=25000 is the future value. P the value that we need to invest. r= 0.04 represent the interest rate in fraction. n = 12 represent the number of times that the rate is compounded in a year. t = 5 years.

If we solve for the value of P we got:

$P= \frac{A}{(1+ \frac{r}{n})^{nt}}$

And replacing we got:

$P= \frac{25000}{(1+ \frac{0.04}{12})^{12*5}} =20475.078$

And rounded to the nesrest penny we need to invest $20475.08 in order to have after 5 years $25000