Question

David’s friend, Keanu, has hired a financial planner for advice on retirement. Considering Keanu’s current expenses and expected future lifestyle changes, the financial planner has stated that once Keanu crosses a threshold of $7,796,223 in savings, he will have enough money for retirement. Keanu has nothing saved for his retirement yet, so he plans to start depositing $70,000 in a retirement fund at a fixed rate of 9.00% at the end of each year. It will take ___ years for Keanu to reach his retirement goal.

Answer 1

28.85

Step-by-step explanation

Keanu has decided to save a fixed amount of 70,000 for a given period. We would need to calculate the number of years to achieve 7,796,223 using the FVIFA formula (Future value interest for an annuity)

Fixed payment× FVIFA=Future value

FVIFA =
`((1+r)^(n) - 1)/(r)`

where r is the periodic rate (9%)

and n is the number of periods

therefore; 70000×
`((1+0.09)^(n) - 1)/(0.09)`=7796223

`{(1+0.09)^(n) }`=(7796223×0.09)/70000

n=27.85

However, since Keanu will not invest until the end of the first year, he will spend 28.85 years to achieve his goal