Answer:
The Annual investment that you will to make will be $1,069.01
Explanation:
In order to calculate the uniform annual investment that will you have to make on the child's 8th through 17th birthdays to meet this goal, we have to make the following calculations:
First we need to calculate the Amount you have at the end of child's 8th year = 600*(1+0.05)^4 + 600*(1+0.05)^3 + 600*(1+0.05)^2 + 600*(1+0.05)^1 = $2,715.38
Therefore, Value of this amount at the end of 17th year = $2715.38 * (1+0.05)^9 = $4,212.45
So, Amount required to be saved = $16,000 - $4,212.45 = $11,787.55
Therefore, to calculate the annual investment we would have to use the following formula:
FV of annuity = P*[((1+r)^n - 1)/r]
P - Periodic payment =?
r - rate per period = 0.05
n - number of periods = 17-8 = 9
$11787.55 = P*(((1+0.05)^9 - 1)/0.05)
P = $11,787.55/11.03 = $1,069.01
The Annual investment that you will to make will be $1,069.01
