Question

How much money does Ted need to invest each month in order to accumulate $10,000 over a five-year period, if he expects to get a return of 5.625% per year

Answer 1

Based on the amount to be accumulated and the return, the amount to invest per month is $144.71.

The amount to invest will be constant which makes it an annuity. First we need to convert the interest rate and period to periodic figures.

Periodic Interest                                      Number of periods

= 5.625% / 12 months                                            = 5 years x 12 month

= 0.46875%                                                             = 60 months

The $10,000 will be the future value of the annuity.

Amount to invest

Future value of annuity = Annuity x ( ( 1 + interest) ^ number of periods -1)/interest

10,000 = Annuity x ( ( 1 + 0.46875%)⁶⁰ - 1) / 0.46875%

10,000 = Annuity x 69.101758487

Annuity = 10,000 / 69.101758487

= $144.71

In conclusion, he should invest $144.71 each month.

Find out more on the future value of annuities at https://brainly.com/question/24559701.