Question

Elizabeth wants to have $500,000 saved for retirement in 20 years. Assuming she can earn an 8% annual return on her investments how much will she need to save at the end of each of the next 20 years to accomplish her goal?

Answer 1

she need to save $10,926.10 at the end of each year.

Step-by-step explanation:

Given:

Future value of annuity = $500,000

Time period, n = 20 years

annual rate of return = 8% = 0.08

`\textup{Future value of annuity}=\textup{Annuity}*[((1+r)^(n)-1)/(r)]`

on substituting the respective values, we get

`\textup{500,000}=\textup{Annuity}*[((1+0.08)^(20)-1)/(0.08)]`

or

Annuity = $10,926.10

Hence,

she need to save $10,926.10 at the end of each year.