In 10 years you are planning to buy a beach condo. the condo you want currently costs $100,000 and is expected to increase in value each year at a rate of 2.5 percent. if you can earn 10% annually on your investments, how much must you invest at the end of each of the next 10 years to be able to buy the condo?

8,031.94

Explanation:

this problem can be solved first calculating the future value of the condo, so we can use the next formula:

where FV is future value, PV is the present value, i is the periodic interest rate and n is the number of periods. So applying to this particular problem we have:

now we must apply the concept of annuity, keep in mind that an annuity is a formula which allows you to calculate the future value of future payments affected by an interest rate.by definition the future value of an annuity is given by:

where is the future value of the annuity, is the interest rate for every period payment, n is the number of payments, and P is the regular amount paid. so:

Solving P we have:

P=8,031.94

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