Question

How much should you set aside each year (end of the period) to accumulate $70,000 after 15 years? The interest rate is 10 percent.

a) $2,966.47
b) $3,500
c) $4,000
d) $5,000

Answer 1

To accumulate $70,000 after 15 years with a 10% interest rate, you need to set aside approximately $2,966.47 each year.

Step-by-step explanation:

To calculate the amount, you need to set aside each year to accumulate $70,000 after 15 years with a 10% interest rate, you can use the formula for the future value of an annuity. The formula is:

FV = P * ((1 + r)^(n) - 1) / r

Where FV is the future value, P is the amount you need to set aside each year, r is the interest rate, and n is the number of periods. In this case, P = $70,000 * 0.1 * (1 + 0.1)^(-15) / ((1 + 0.1)^(-15) - 1) which equals approximately $2,966.47.