Answer:
Atleast $13611.7 at 8% interest rate compounded anually
Explanation:
A=P(1+r/n)^nt
A: Total amout
P: Principal amount or amount to be invested
r: interest rate
n: number of times interest is applied in a time period
t: total time period
Thlema must have atleast $20,000 after 5 years
20000=P×(1+ 0.08/1)^5
P= $ 13611.7
Answer:
$16,560.63
Explanation:
To calculate this, the relevant formula to us the formula for calculating the present value of an ordinary annuity since the expenses is assumed to be incurred only at the end of the year. The formula is given as follows:
PV = P × [{1 - [1 ÷ (1+r)]^n} ÷ r] …………………………………. (1)
Where;
PV = Present value or the amount to deposit today?
P = yearly withdrawal = $5,000
r = interest rate = 8% = 0.08
n = number of years = 4
Substitute the values into equation (1) to have:
PV = 5,000 × [{1 - [1 ÷ (1+0.08)]^4} ÷ 0.08]
= 5,000 × [{1 - [1 ÷ 1.08]^4} ÷ 0.08]
= 5,000 × [{1 - [0.925925925925926]^4} ÷ 0.08]
= 5,000 × [{1 - 0.735029852796453} ÷ 0.08]
= 5,000 × [0.264970147203547 ÷ 0.08]
= 5,000 × 3.31212684004434
PV = $16,560.63
Thelma must deposit $16,560.63 today.
