Question

I plan to deposit their annual profits in an investment account earning a 9% annual return. If the owner starts with their first deposit today for $22,000 and expects to make the same profit for the next 7 years, how much will be saved for retirement at that point?

Answer 1

Answer: We can use the formula for future value of an annuity to calculate how much will be saved for retirement:

FV = Pmt x (((1 + r)^n - 1) / r)

where:

FV is the future value of the annuity

Pmt is the payment made each period (in this case, the annual profit of $22,000)

r is the annual interest rate (9% or 0.09 as a decimal)

n is the number of periods (7 years)

Substituting the given values into the formula, we get:

FV = $22,000 x (((1 + 0.09)^7 - 1) / 0.09)

FV = $22,000 x (1.9904 / 0.09)

FV = $22,000 x 22.116

FV = $485,552

Therefore, the amount saved for retirement after 7 years will be $485,552.

Explanation: