Answer :
Answer:
$200,000 every year
Explanation:
Assuming you are saving without compounding your interest
Applying the Simple interest/Formula
A = P (1 + rt)
A = final amount
P = initial principal balance
r = annual interest rate
t = time (in years)
Given A=$3,000,000
P=?
r=5%
t=10 years
Substituting we have
Calculation:
First, converting R percent to r a decimal
r = R/100 = 5%/100 = 0.05 per year.
Solving our equation:
3,000,000 = P(1 + (0.05 × 10)
3,000,000 = P(1 + (0.5)
3,000,000 = 1.5P
P=3,000,000/1.5
P=$2,000,000
The amount to be saved at 5% interest rate per year is
2,000,000/10
$200,000 every year
Answer:
Annual savings = $238,512
Explanation:
Given Data:
Interest rate (r) = 5%
Number of years (n) = 10 years
Future value (Fv) = $3,000,000
Annual savings = ?
Calculating the future value of annuity factor using the formula;
Future value annuity factor (r%, n) = [(1 + r)¹⁰ - 1]/r
Substituting, we have
Future value annuity factor (5%, 10) = [(1 + 0.05)¹⁰ - 1]/0.05
= [(1.05)¹⁰ - 1]/0.05
= (1.6289 - 1)/0.05
= 0.6289/0.05
= 12.578
But,
Future value = Annual savings x Future value annuity factor (r%, n)
Substituting, we have
$3,000,000 = Annual savings x 12.578
Annual savings = 3,000,000/12.578
= $238,512