John just turn 25 years old yesterday. He wants to save $5,000,000 by the time h

Question

John just turn 25 years old yesterday. He wants to save $5,000,000 by the time he is 65. John has twin daughters that are two years old today. He wants to pay each daughter $40,000 per year for five years for anticipated college expenses. The first payment to begin when his daughters turn 18. He also has $10,000 saved and plans to invest it at 8% interest annually until he turns 65. Also he has property to sell ten years from today with a profit of $100,000, which he invests at 8% until 65. How much money does he need to save each year starting today if he earns 8% on his investments annually to reach his goal?

Thanks

Explanation / Answer

let all the interest be compunded anually first money from saved one he will get={P(1 + r)t}=10000(1+.08)*40=432000$ from property={P(1 + r)t}=3240000$ expenses=40000*2*5=400000$ more savings he need to do=5000000+400000-432000-3240000=1728000$ {P(1 + r)t}=1728000$ P=1728000/(1.08*40)=40000$

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