Question

3. You have decided to begin saving for retirement. You are currently 20 years old and you would like to retire when you are 65. Your goal is to have $3 million when you retire. How much will you need to put away each year to reach your goal assuming that you will make equal payments starting 1 year from now and ending when you retire and that you will earn 12% on your money

Answer 1

Annual deposit= $2,475.63

Step-by-step explanation:

Giving the following information:

Future Value= $3,000,000

Number of periods= 44

Interest rate= 0.12 compounded annually

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*0.12) / [(1.12^44) - 1]

A= $2,475.63