Question

Assume that Ray is 38 years old and has 27 years for saving until he retires. He expects an APR of 7.5% on his investments. How much does he need to save if he puts money away annually in equal end-of-the-year amounts to achieve a future value of $1,200,000 dollars in 27 years' time

Answer 1

Annual deposit= $14,882.44

Step-by-step explanation:

Giving the following information:

Future Value= $1,200,000

Number of periods= 27 years

Interest rate= 7.5%

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= (1,200,000*0.075) / [(1.075^27) - 1]

A= $14,882.44