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8 July, 06:48

Williamsburg Nursing Home is investing in a restricted fund for a new assisted-living home that will cost $6 million. How much money do they need to invest each year to have $6 million in fifteen years? If the expected rate of return on the investment is 10%, and the hospital invests at the end of each year?

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  1. 8 July, 10:27
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    Annual deposit = $188,842.66

    Explanation:

    Giving the following information:

    Williamsburg Nursing Home is investing in a restricted fund for a new assisted-living home that will cost $6 million.

    n = 15 years

    i = 10%

    We need to use the following formula:

    FV = {A*[ (1+i) ^n-1]}/i

    A = annual deposit

    Isolating A:

    A = (FV*i) / {[ (1+i) ^n]-1}

    A = (6,000,000*0.10) / [ (1.10^15) - 1]

    A = $188,842.66
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