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You want $1.5M to retire in 45 years. You have $15,000 today. If you can deposit the funds in a money market account which earns 4.5% interest per year, and say you plan to make yearly deposits, how large should the annual deposits be? Group of answer choices

User Jwismar
by
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1 Answer

4 votes

Answer:

$10,020

Step-by-step explanation:

The computation of the large amount that should be deposited is shown below:

Future value of annuity is

= Annuity × [(1+rate)^time period-1] ÷ rate

= Annuity × [(1.045)^45-1] ÷ 0.045

= Annuity × 138.8499651

Future value = Present value (1 +interest rate)^number of years

where

= $15,000 × (1.045)^45

Now

The total future value: is

$1,500,000 = $15,000 × (1.045)^45 + Annuity × 138.8499651

$1,500,000 = ($15,000 ×7.24824843) + Annuity × 138.8499651

Annuity = ($1,500,000 - $108,723.7264) ÷ 138.8499651

= $10,020

User Niroj Adhikary
by
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