social Security tax is 12.4%. assume you earn 100,000$ a year if instead of paying taxes...

social Security tax is 12.4%. assume you earn 100,000$ a year if instead of paying taxes you could invest in private Social Security.how much would you be in your account after 40 years I don't I don't 8% rate of return?

Expert Solution

Annual contribution = 100000*12.4% = 12,400

FV of annuity	=	P * [ (1+r)^n -1 ]/ r

Periodic payment	P=	$ 12,400.00

rate of interest per period	r=
Rate of interest per year		8.0000%

Payment frequency		Once in 12 months
Number of payments in a year		1.00
rate of interest per period		0.08*12/12	8.0000%

Number of periods
Number of years		40
Number of payments in a year		1
Total number of periods	n=	40

FV of annuity	=	12400* [ (1+0.08)^40 -1]/0.08

FV of annuity	=	3,212,300.83

Amount in 40 years is $3,212,300.83

ekkarill92 answered 3 years ago

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