Instead of investing the entire $1,050,800, Bogut invests $282,200 today and plans to make 8 equal annual investments into the fund beginning one year from today. What amount should the payments be if Bogut plans to establish the $2,601,739 foundation at the end of 8 years?

Annual deposit = $195,494.90

Explanation:

Giving the following information:

Bogut invests $282,200 today and plans to make 8 equal annual investments into the fund beginning one year from today.

Final value = $2,601,739

We need to calculate the final value of the first investment (282,200), and then calculate the 8 equal deposits.

To determine the final value, we need the interest rate. I will invent an interest rate 0f 8% compounded annually.

FV=PV * (1+i) ^n

FV = 282,200 * (1.08^8) = $522,332.50

Difference = 2,601,739 - 522,332.50 = $2,079,406.5

To calculate the annual deposit, we will use the following formula:

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

A = annual deposit

Isolating A:

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

A = (2,079,406.5*0.08) / [ (1.08^8) - 1] = $195,494.90