Answer:
My parents will need to make 18 deposits of 24,724.16 dollars
My parent will then have to deposit 28,185.55 per year
which is $3,461.39 more than the other scenario
Explanation:
We need to solve for the future value of an annuity-due (because the payment are made at the beginning of each period
[tex]FV \div \frac{(1+r)^{time} -1 }{rate}(1+r) = C\\[/tex]
FV 1,000,000
time 18
rate 0.08
[tex]1,000,000 \div \frac{(1+0.08)^{18}-1 }{0.08}(1+0.08) = C\\[/tex]
C $ 24,724.163
If we need do save and additional 140,000 dollars:
[tex]FV \div \frac{(1+r)^{time} -1 }{rate}(1+r) = C\\[/tex]
FV 1,140,000
time 18
rate 0.08
[tex]1,140,000 \div \frac{(1+0.08)^{18}-1 }{0.08}(1+0.08) = C\\[/tex]
C $ 28,185.546
The difference will be:
28,185.55 - 24,724.16 = 3.461,39
