If he invests the $$3,000$ today, the terminal value of this initial investment in $5$ years $($earning an average $5\%$ return$)$ will be $$ This means that he must accumulate the remaining $$ $$21,117\mathrm{.}16$ through his annual savings plan to obtain the full $$25,000$ to cover his expenses for the year. Still assuming an average return on investment of $5\%,$ the additional yearly investment required to reach Lorenzo's targeted financial goal within $5$ years is $$

Suppose instead that Lorenzo had no capital saved and thus needed to accumulate the entire $$25,000$ in the next $5$ years. In this case, his annual contribution would have to be $$

When Lorenzo starts with an initial investment of $$3,000,$ the total amount that he ends up contributing to accumulate $$25,000$ is equal to the initial investment plus the additional yearly payments, for a total of $.$ When he starts with no initial capital contribution, the amount he ends up contributing is equal to the sum of all annual contributions you calculated in the no$-$initial$-$capital scenario, for a total of $$

Once Lorenzo has determined the annual amount he needs to save, the next step toward achieving his goal is coming up with an investment plan.

True or False: The appropriate investment plan depends only on the total amount of money he intends to save, not on the investment objective.

True

False

Future Value Factors

Future Value Annuity Factors

Formula

Excel

$\backslash$table$[[$Year$,2\%,5\%,8\%,10\%$

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