Question

Today is your 25th birthday, and you have calculated that you need to accumulate $2.1 Million by your 70th birthday in order to retire in a manner in which you are accustomed to living. If your retirement account earns 7.1% per year simple interest, how much must you deposit on each of your birthdays (from 26 to 70) in order to reach your target retirement savings on your 70th birthday? (Answer to the nearest dollar.)

Answer 1

Let the amount deposited on each birthday be X

number of years to be deposited = 70-25= 45

interest rate = 7.1%

7.1%*(1+2.....44)*X+X*45=2100000
X*(45+7.1%*44*45/2)=2100000
X=2100000/(45+7.1%*44*45/2)
X=18,214.94

how much must you deposit on each of your birthdays (from 26 to 70)= 18,214.94