Question

You are saving for retirement. To live​ comfortably, you decide you will need to save $ 3 comma 000 comma 000 by the time you are 65. Today is your 26 th ​birthday, and you​ decide, starting today and continuing on every birthday up to and including your 65 th ​birthday, that you will put the same amount into a savings account. If the interest rate is 10 %​, how much must you set aside each year to make sure that you will have $ 3 comma 000 comma 000 in the account on your 65 th ​birthday?

Answer 1

Annual deposit= $7,472.95

Step-by-step explanation:

Giving the following information:

Future value= $3,000,000

Number of years= 39

Interest rate= 10%

To calculate the annual deposit, we need to use the following formula:

FV= {A*[(1+i)^n-1]}/i

A= annual deposit

Isolating A:

A= (FV*i)/{[(1+i)^n]-1}

A= (3,000,000*0.1) / [(1.10^39)-1]

A= $7,472.95