Instead of investing the entire $1,050,800, Bogut invests $282,200 today and plans to make 8 equal annual investments into the fund beginning one year from today. What amount should the payments be if Bogut plans to establish the $2,601,739 foundation at the end of 8 years?

Annual deposit= $195,494.90

Explanation:

Giving the following information:

Bogut invests $282,200 today and plans to make 8 equal annual investments into the fund beginning one year from today.

Final value= $2,601,739

We need to calculate the final value of the first investment (282,200), and then calculate the 8 equal deposits.

To determine the final value, we need the interest rate. I will invent an interest rate 0f 8% compounded annually.

FV=PV*(1+i)^n

FV= 282,200*(1.08^8)= $522,332.50

Difference= 2,601,739 - 522,332.50= $2,079,406.5

To calculate the annual deposit, we will use the following formula:

FV= {A*[(1+i)^n-1]}/i

A= annual deposit

Isolating A:

A= (FV*i)/{[(1+i)^n]-1}

A= (2,079,406.5*0.08)/ [(1.08^8)-1]= $195,494.90

i'ts proportional. if the inflation rate is 12% for example, the cpi will be 12% less.

hope it ,

bioteacher101

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