Andrew Bogut just received a signing bonus of 1,000,000. His plan is to invest this payment in a fund that will earn 8%, compounded annually. a) If Bogut plans to establish the AB Foundation once the fund grows to 1,999,000, how many years until he can establish the foundation?

b) Instead of investing the entire 1,000,000, Bogut invests 300,000 today and plans to make 9 equal investments into the fund beginning one year from today. What amount should the payments be if Bogut plans to establish the 1,999,000 foundation at the end of 9 years.

Show what n, i, pmt, fv, pv would be and what journal entry would be

a) If Bogut plans to establish the AB Foundation once the fund grows to 1,999,000, how many years until he can establish the foundation?

future value = present value x (1 + i)ⁿ

$1,999,000 = $1,000,000 x (1 + 8%)ⁿ

1.08ⁿ = 1.999

n = log 1.999 / log 1.08 = 9 years

b) Instead of investing the entire 1,000,000, Bogut invests 300,000 today and plans to make 9 equal investments into the fund beginning one year from today. What amount should the payments be if Bogut plans to establish the 1,999,000 foundation at the end of 9 years.

future value of $300,000 = $300,000 x 1.08⁹ = $599,701

you need to save $1,999,000 - $599,701 = $1,399,299

FVIFA, 8%, 9 periods = 12.488

annual savings = $1,399,299 / 12.488 = $112,051.50

answer; work samples;

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