Answer:
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
