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To receive monthly payments of $1500 for 20 years, how much would a person have to invest now in an annuity with an annual interest rate of 3.1% to achieve this goal? Round the answer to the nearest dollar.

Sagot :

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Given the possibility of an investment with an annual interest rate of 3.1 %, the person must deposit $ 580645.16 to receive monthly payments of $ 1500 for 20 years.

How to determine the require investment to receive a desired monthly payment

According to this question, the person have decided to invest money to receive a monthly payment, meaning no savings and the adequacy of using the simple interest formula:

g = C · (r/100)     (1)

Where:

  • C - Invested money, in monetary units.
  • r - Monthly interest rate, in percentage.
  • g - Monthly payment, in monetary units.

If we know that g = 1500 and r = 3.1/12, then the invested money must be:

C = 100 · g/r

C = 100 · [1500/(3.1/12)]

C = 580645.16

Given the possibility of an investment with an annual interest rate of 3.1 %, the person must deposit $ 580645.16 to receive monthly payments of $ 1500 for 20 years.

To learn more on interest rates: https://brainly.com/question/13735414

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