Question

Mr. Hopper expects to retire in 25 years, and he wishes to accumulate $750,000 in his retirement fund by that time. If the interest rate is 10% per year, how much should Mr. Hopper put into his retirement fund each year in order to achieve this goal? (Assume that he will deposit the same amount each year into his retirement fund, beginning 1 year from today.)

Answer 1

$7,626.05

Step-by-step explanation:

Future value of annuity = PMT*[((1+r)^n - 1) / r]

$750,000 = PMT * [((1+0.10)^25 - 1) / 0.10]

$750,000 = PMT * [9.8347059/0.10]

$750,000 = PMT * 98.347059

PMT = $750,000/98.347059

PMT = $7626.05417616

PMT = $7,626.05

So, Mr. Hopper need to put $7,626.05 into his retirement fund each year in order to achieve the goal.