A no-load (commission-free) mutual fund has grown at a rate of 7% compounded ann

Question

A no-load (commission-free) mutual fund has grown at a rate of 7% compounded annually since its beginning. If it is anticipated that it will continue to grow at that rate, how much must be invested every year so that $15,000 will be accumulated at the end of six years? Click the icon to view the interest factors for discrete compounding when i = 7% per yoar. i More Info $ must be invested every year. (Round to the nearest dollar) Single Payment Compound Present Amount Worth Factor Factor (F/P, I, N) (P/F, I, N) 1.0700 0.9346 1.1449 0.8734 1.2250 0.8163 1.3108 0.7629 1.4026 0.7130 Compound Amount Factor (FIA,N) 1.0000 2.0700 3.2149 4.4399 5.7507 Equal Payment Series Sinking Present Fund Worth Factor Factor (A/F, I, N) (P/A, I, N) 1.0000 0.9346 0.4831 1.8080 0.3111 2.6243 0.2252 3.3872 0.1739 4.1002 Capital Recovery Factor (A/P, 1, N) 1.0700 0.5531 0.3811 0.2952 0.2439 AWN 1.5007 1.6058 1.7182 1.8385 1.9672 0.6663 0.6227 0.5620 0.5439 0.5083 7.1533 8.6540 10.259B 11.9780 13.8164 0.1398 0.1156 0.0975 0.0835 0.0724 4.7665 5.3893 5.9713 6.5152 7.0236 0.2098 0.1856 0.1675 0.1535 0.1424 D Print Done Enter your answer in the answer box and then click Check Answer.

Explanation / Answer

Calculation of savings required to build the corpus:

PMT = payment = ? ; FV = Future value = $15,000 ; N = 6 ; R = 7%

Formula:

PMT = FV x R x / ((1+R)^N - 1)

PMT = 15000*7%/((1+7%)^6-1)

PMT = $2,097

Hence, $2,097 must me invested every years so that $15,000 can be achieved after 6 years.

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