Question
In: Finance
Your retirement account (which is expected to yield 7.24% return per year) has a current balance...
Your retirement account (which is expected to yield 7.24% return per year) has a current balance of $50,000. How much would need to invest each year in order to accumulate a total of $1,000,000 in 30 years? Show the formula and steps along with explanation
Solutions
Expert Solution
We use the formula:
A=P(1+r/100)^n
where
A=future value
P=present value
r=rate of interest
n=time period.
Future value of 50,000=50,000*(1.0724)^30
=50,000*8.14149498
=$407074.749
Future value of annuity=Annuity[(1+rate)^time period-1]/rate
=Annuity[(1.0724)^30-1]/0.0724
=Annuity*98.6394334
Hence 1,000,000=407074.749+Annuity*98.6394334
Annuity=(1,000,000-407074.749)/98.6394334
=$6011.04(Approx)
jeff jeffy answered 2 years agoRelated Solutions
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