Ask Question
20 February, 23:31

You want to accumulate $1 million by your retirement date, which is 25 years from now. You will make 25 deposits in your bank, with the first occurring today. The bank pays 8% interest, compounded annually. You expect to receive annual raises of 3%, which will offset inflation, and you will let the amount you deposit each year also grow by 3% (i. e., your second deposit will be 3% greater than your first, the third will be 3% greater than the second, etc.). How much must your first deposit be if you are to meet your goal?

+4
Answers (1)
  1. 21 February, 02:09
    0
    Answer: $34,696

    Explanation: $1000,000/25=$40,000 as deposit to be made 25 times, but out of this amount 8% interest will be subtracted which gives 8/100*40,000=$3200.

    Hence annual deposit will be $40000-$3200=$36800.

    But annual raise of 3% should be subtracted as well making deposit to be 3/100*36800=$1104.

    Substracting we have $36800-$1104=$35696.

    Hence i must deposit $35696 first to meet this goal.
Know the Answer?
Not Sure About the Answer?
Find an answer to your question ✅ “You want to accumulate $1 million by your retirement date, which is 25 years from now. You will make 25 deposits in your bank, with the ...” in 📘 Business if you're in doubt about the correctness of the answers or there's no answer, then try to use the smart search and find answers to the similar questions.
Search for Other Answers