You are saving for retirement. To live comfortably, you decide you will need to save $ 3 comma 000 comma 000 by the time you are 65. Today is your 26 th birthday, and you decide, starting today and continuing on every birthday up to and including your 65 th birthday, that you will put the same amount into a savings account. If the interest rate is 10 % , how much must you set aside each year to make sure that you will have $ 3 comma 000 comma 000 in the account on your 65 th birthday?

Question

Business

Yael Lawrence

30 March, 06:24

You are saving for retirement. To live comfortably, you decide you will need to save $ 3 comma 000 comma 000 by the time you are 65. Today is your 26 th birthday, and you decide, starting today and continuing on every birthday up to and including your 65 th birthday, that you will put the same amount into a savings account. If the interest rate is 10 % , how much must you set aside each year to make sure that you will have $ 3 comma 000 comma 000 in the account on your 65 th birthday?

+2

Answers (1)

Know the Answer?

Chaim Garrett · Answer 1

Annual deposit = $7,472.95

Explanation:

Giving the following information:

Future value = $3,000,000

Number of years = 39

Interest rate = 10%

To calculate the annual deposit, we need to use the following formula:

FV = {A*[ (1+i) ^n-1]}/i

A = annual deposit

Isolating A:

A = (FV*i) / {[ (1+i) ^n]-1}

A = (3,000,000*0.1) / [ (1.10^39) - 1]

A = $7,472.95