Question

You deposit $65,000 in the bank today. What amount should you deposit in year 8, if you wish to accumulate $400,000 in year 20 if the interest rate is 6%?

Answer 1

Amount should be deposited in 8 years is $ 95,187.62

Step-1:Calculation of value of $ 65,000 in 20 years
Future value	=	P0	*	(1+i)^n
	=	$     65,000.00	*	(1+0.06)^20
	=	$     65,000.00	*	3.207135472
	=	$ 2,08,463.81
Where,
P0	=	$     65,000.00
i	=	6%
n	=	20
Step-2:Calculation of remainig amount in 20 years
Tota required amount		$ 4,00,000.00
Future value of above investment		$ 2,08,463.81
Balance required future value		$ 1,91,536.19
Step-3:Calculation of required deposit in 8 years
Required deposit in 8 years	=	FV	*	(1+i)^-n
	=	$ 1,91,536.19	*	(1+0.06)^-12
	=	$ 1,91,536.19	*	0.496969364
	=	$ 95,187.62
Where,
FV			=	$ 1,91,536.19
i			=	6%
n	=	20-8	=	12