Question

We want to have $250,000 in 26 years. Annual rate is 5.6%. How much do we need to invest at the end of each year?

Answer 1

Given that;
Future value=$250000
Time period=26 years
Annual rate is 5.6%
We need to determine the annual investment or annual payment.

The formula we will use is:
Future value=(Payment)*((1+Interest rate)^(Time period)-1)/(Interest rate)
Substituting the values, we get;
250000=(Payment)*((1+5.6%)^(26)-1)/(5.6%)
=>250000=(Payment)*((1.056)^(26)-1)/(5.6%)
=>250000=(Payment)*(4.123460827-1)/(5.6%)
=>250000=(Payment)*(3.123460827)/(5.6%)
=>250000=(Payment)*55.7760862
=>Payment=250000/55.7760862
=>Payment=4482.207645 or 4482.21 (Rounded to 2 decimal places)

Answer: Hence, we need to invest $4482.21 at the end of each year.