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Ludmilka [50]
2 years ago
5

How much money does Ted need to invest each month in order to accumulate $10,000 over a five-year period, if he expects to get a

return of 5.625% per year
Business
1 answer:
Kipish [7]2 years ago
7 0

Based on the amount to be accumulated and the return, the amount to invest per month is<u> $144.71.</u>

The amount to invest will be constant which makes it an annuity. First we need to convert the interest rate and period to periodic figures.

<h3>Periodic Interest                                      Number of periods </h3>

= 5.625% / 12 months                                            = 5 years x 12 month

= 0.46875%                                                             = 60 months

The $10,000 will be the future value of the annuity.

<h3>Amount to invest </h3>

Future value of annuity = Annuity x ( ( 1 + interest) ^ number of periods -1)/interest

10,000 = Annuity x ( ( 1 + 0.46875%)⁶⁰ - 1) / 0.46875%

10,000 = Annuity x 69.101758487

Annuity = 10,000 / 69.101758487

= $144.71

In conclusion, he should invest $144.71 each month.

Find out more on the future value of annuities at brainly.com/question/24559701.

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