Question

Steve Madison needs $250,000 in 10 years. How much must he invest at the end of each year, at 5% interest, to meet his needs?

Short answer

The amount which should be invested at the end of each year is $19,876.

Step-by-step solution

Definition of Investment

Investment is defined as any asset or item acquired with the motive of generating income or appreciation in the value.

Calculation of the amount that should be invested at the end of each year

$\begin{array}{rcl}\mathit{F}\mathit{V}\mathbf{}\mathbf{-}\mathbf{}\mathit{O}\mathit{A}\mathbf{}& \mathbf{=}& \mathbf{}\mathbf{R}\mathbf{(}\mathbf{F}\mathbf{V}\mathbf{F}\mathbf{}\mathbf{-}\mathbf{}\mathbf{O}\mathbf{A}\mathbf{n}\mathbf{,}\mathbf{i}\mathbf{)}\\ \mathbf{250}\mathbf{,}\mathbf{000}\mathbf{}& \mathbf{=}& \mathbf{}\mathit{R}\mathbf{\times }\mathbf{12}\mathbf{.}\mathbf{57789}\\ \mathbf{}& \mathbf{=}& \mathbf{}\mathbf{\$}\mathbf{19}\mathbf{,}\mathbf{876}\end{array}$