Research: M. Fields, Inc. is embarking on a financial journey to accumulate $1 million within a span of 10 years. The objective is to gather this amount to pay off a loan at the end of the specified period. With an annual interest rate of 12%, the company needs to carefully plan its annual deposits to achieve the desired goal.
To calculate the necessary annual deposit, we need to consider the compound interest formula:
A = P(1 + r/n)^(nt)
Where:
A = Final amount ($1 million)
P = Initial deposit (to be determined)
r = Annual interest rate (12%)
n = Number of times interest is compounded per year
t = Number of years (10)
Since the question specifies that the deposit will be made at the end of each year, n = 1.
By rearranging the formula, we can solve for P:
P = A / (1 + r/n)^(nt)
Plugging in the known values, we find:
P = $1,000,000 / (1 + 0.12/1)^(1*10)
P = $1,000,000 / (1 + 0.12)^10
P = $1,000,000 / (1.12)^10
P ≈ $310,708.51
Therefore, M. Fields, Inc. must deposit approximately $310,708.51 at the end of each year for ten years to accumulate the desired amount of $1 million. It is important to note that these calculations assume a constant annual interest rate of 12%.
This decision requires careful consideration, as it involves allocating a significant amount of resources towards these annual deposits. M. Fields, Inc. should assess its financial capabilities and ensure that this investment aligns with its long-term goals and overall financial stability.
The company may explore various investment options to achieve the desired annual return of 12%. It is crucial to conduct thorough market research, consult with financial advisors, and consider the risk associated with different investment vehicles.
Additionally, M. Fields, Inc. should establish a robust financial plan to monitor the progress towards its $1 million goal. Regular evaluations and adjustments might be necessary to account for potential fluctuations in the market and ensure the company remains on track.
By diligently following this strategy, M. Fields, Inc. can accumulate the required funds over the course of ten years and successfully pay off its loan. However, it is important to remember that the investment landscape is dynamic, and periodic reassessment of the chosen investment strategy is essential to adapt to changing market conditions.
In conclusion, M. Fields, Inc. aims to accumulate $1 million over ten years to pay off a loan. By depositing approximately $310,708.51 at the end of each year with a 12% annual interest rate, the company can achieve this goal. However, careful financial planning and monitoring are crucial to ensuring long-term success.
