question archive Sho-Han, 35, plans to invest 10% of her income every year until her retirement at age 65
Sho-Han, 35, plans to invest 10% of her income every year until her retirement at age 65
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Sho-Han, 35, plans to invest 10% of her income every year until her retirement at age 65. Her current annual income is $30,000 and this is expected to increase by 3% per year. If the rate of return she can earn is 8% on her investment, how much will she have at retirement? Assume she invests her money at the end of each year.
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Initial Annual deposit = 30,000 x 10% = $3,000
Growth rate = 3%
Interest rate = 8%
Number of years = 65 - 35 = 30
Amount she will have = P x [(1 + r)n - (1 + g)n] / (r - g) = 3,000 x [(1 + 0.08)30 - (1 + 0.03)30] / (0.08 - 0.03) = $458,123.67
