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bees13 bees13
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6 years ago
Art wants to know how much he'll have to invest today to receive an annuity of $8,000 for three years if interest is earned at 10% annually. He'll make all of his withdrawals at the end of each year. How much should Art invest?
   
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#1
Educator
6 years ago
Hi Bees13

What you'll need:

 R=(A∙i)/[(1+i)^n−1]

Where:

A=future value amount -- 8000
R=regular deposit/payment -- Neutral Face
i=interest rate per compounding period -- 0.10
n=total number of deposits -- 3 (1 per year)

R = ( 8000 * 0.10 ) / [ (1 + 0.1)^3 - 1 ]

R = $ 2416.91

The person needs to invest this amount TODAY to obtain 8000 in 3 years.



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