(2) The formula is [(1 + r)^n - 1] / r, or [(1.01875)^72 - 1] / .01875 = 2.8095 / .01875 = 149.84. That's the FV of an Annuity of $1.
So 149.84 is the FV of an Annuity of $1, or 149.84 = Annuity of $1 x 149.84.
So 100,000 = Annuity x 149.84, and Annuity = 100,000 / 149.84, or 667.38
You're correct.
How much money should parents invest at the birth of a child to provide their child with $100,000 at the age of 18? Assume that the money earns interest at 7.5% compounded quarterly.
The formula I'm using is 'a=p(1+r/n)^nt' and I get 26250.11644. Is this right?
How much money should parents invest each month after the birth of a child to provide their child with $100,000 at the age of 18? Assume that the money earns interest at 7.5% compounded quarterly.
The formula I'm using is 'a=p(((1+r/n)^nt)-1/(r/n))' and I get 667.3768954. Is this right?
