question archive Suppose that you have estimated that, to provide for your retirement income, you will need $1,150,000 on deposit in your retirement account when you retire
Suppose that you have estimated that, to provide for your retirement income, you will need $1,150,000 on deposit in your retirement account when you retire
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Suppose that you have estimated that, to provide for your retirement income, you will need $1,150,000 on deposit in your retirement account when you retire. You believe that you will earn an average of 10% on your retirement investments until you retire in 30 years. What must your annual deposits be to accumulate this total?
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Answer:
Future Value of Annuity = Annual Payment * [ {( 1+rate of Interest ) ^ Time - 1} / Rate of Interest ]
$ 1,150,000 = Annual Payment * [ {( 1+10% ) ^ 30 - 1} / 10%]
Annual Payment= $ 1,150,000 / 164.4940227
= $ 6,991.14
Hence the correct answer is $ 6,991.14
