Question

You are managing the investments of a pension fund. You have to make a payment to your customers in 6 months.
The total amount of the payments is equal to $2,000,000 .
How much do you have to invest each month, starting next month, for 5 months to exactly provide for the payments if your investments earn 5.00% APR (compounded monthly)?

Calculate your answer to the nearest dollar.

Write only the number with no dollar sign or comma (e.g., 3711)

Answer 1

Future value of annuity= payment per period * [(1+i)^n-1]/i

i = interest rate per period

n = number of periods

=>

x * [(1+0.05/12)^5 - 1]/(0.05/12) = 2000000

=>

monthly payment = 396680.53

= 396681