In: Finance
Amanda, age 25, currently has $10,000 in her savings account. She figures that she can save $20,000 per year at the start of each year (starting one year from now) indefinitely. She thinks that she can earn an after-tax return of 8% on her investments. She wants to have $1,000,000 at which point she will retire. How long will it take her to achieve her goal? Round your answer to 1 decimal point.
Here
Present savings = $10,000
Interest rate = 8%
Saving per year = $20000
Amount at retirement = $1,000,000
So
1000000 = Future Value of Present savings + Future Value of Saving per year
1000000 = 1000 (0.08)n + ((20000) / (0.08)) / ((1+0.08)n - 1)
n = 20.4
So it will take her 20.4 years to achieve her goal