Carolyn Ellis is setting up an annuity for her retirement. She can set aside $2,000 at the end of each year for the next 20 years and it will earn 6% annual interest. What lump sum will she need to set aside today at 6% annual interest to have the same retirement fund available 20 years from now? How much more will Carolyn need to invest in periodic payments than she will if she makes a lump sum payment if she intends to accumulate the same retirement balance?© BrainMass Inc. brainmass.com June 3, 2020, 11:36 pm ad1c9bdddf
The solution explains how to determine the lump sum amount to be saved today so as given a the same future value as of annual savings.