Question

In order to accumulate $200,000 after 25 years, calculate the amounts that must be invested at the end of each year at

a) 8% compounded annually.
b) 10% compounded annually.

Answer 1

To calculate the amounts that must be invested each year for a target amount, you can use the formula for future value of an ordinary annuity.

Step-by-step explanation:

To calculate the amounts that must be invested each year in order to accumulate $200,000 after 25 years, we can use the formula for future value of an ordinary annuity. For 8% compounded annually, the formula is:

$200,000 = X * (1 + 0.08)^25 - 1 / 0.08

For 10% compounded annually, the formula is:

$200,000 = X * (1 + 0.1)^25 - 1 / 0.1

Solving these equations will give you the amounts that must be invested each year.