An individual wants to accumulate $750,000 for retirement in 30 years. She wants to make yearly...

An individual wants to accumulate $750,000 for retirement in 30 years. She wants to make yearly deposits into an account which earns 8% annually. Determine the size of the payments needed if the payments are made at: A: the end of the year. ($6620.58) B: the beginning of each year. ($6130.16)

Solutions

Expert Solution

- Future Value to accumulate in 30 years = $750,000

- She wants to make yearly deposits into an account which earns 8% annually

A). Calculating the size of payments if payments are made at the end of the year using FV of ordinary annuity formula:-

Where, C= Periodic Payments

r = Periodic Interest rate = 8%

n= no of periods = 30 years

C = $6620.58

So, the size of payments if payments are made at the end of the year is $6620.58

B). Calculating the size of payments if payments are made at the beginning of the year using FV of annuity Due formula:-

Where, C= Periodic Payments

r = Periodic Interest rate = 8%

n= no of periods = 30 years

C = $6,130.16

So, the size of payments if payments are made at the beginning of the year is $6,130.16

If you need any clarification, you can ask in comments.

If you like my answer, then please up-vote as it will be motivating

jeff jeffy answered 1 year ago

Next > < Previous

Related Solutions

An individual wants $650,000 for retirement on January 1, 2060. She will make annual payments beginning...

An individual wants $650,000 for retirement on January 1, 2060. She will make annual payments beginning on January 1, 2016 and ending on January 1, 2051. If money can earn 9.5% annually, determine the size of the payments. please show work

You wish to retire in 30 years with retirement savings equal to $750,000. How much should...

You wish to retire in 30 years with retirement savings equal to $750,000. How much should you put away each month if the annual interest rate is 9.75%? Round to the nearest 0.01.

Your client is 22 years old; and she wants to begin saving for retirement, with the...

Your client is 22 years old; and she wants to begin saving for retirement, with the first payment to come one year from now. She can save $4,000 per year; and you advise her to invest it in the stock market, which you expect to provide an average return of 6% in the future. a. If she follows your advice, how much money will she have at 65? Round your answer to the nearest cent. b. How much will she...

Your client is 38 years old; and she wants to begin saving for retirement, with the...

Your client is 38 years old; and she wants to begin saving for retirement, with the first payment to come one year from now. She can save $3,000 per year; and you advise her to invest it in the stock market, which you expect to provide an average return of 7% in the future. If she follows your advice, how much money will she have at 65? Round your answer to the nearest cent. $ How much will she have...

Your client is 26 years old. She wants to begin saving for retirement, with the first...

Your client is 26 years old. She wants to begin saving for retirement, with the first payment to come one year from now. She can save $8000 per year and you advise her to invest it in the stock market, which you expect to provide an expected return of 10% in the future. A) If she follows your advice, how much money she will have at 65? B) She expects to live for 20 years after she retires at 65....

Your client is 27 years old. She wants to begin saving for retirement, with the first...

Your client is 27 years old. She wants to begin saving for retirement, with the first payment to come one year from now. She can save $14,000 per year, and you advise her to invest it in the stock market, which you expect to provide an average return of 8% in the future. If she follows your advice, how much money will she have at 65? Do not round intermediate calculations. Round your answer to the nearest cent. $ How...

Your client is 23 years old. She wants to begin saving for retirement, with the first...

Your client is 23 years old. She wants to begin saving for retirement, with the first payment to come one year from now. She can save $15,000 per year, and you advise her to invest it in the stock market, which you expect to provide an average return of 6% in the future. If she follows your advice, how much money will she have at 65? Do not round intermediate calculations. Round your answer to the nearest cent. $ How...

Your client is 40 years old. She wants to begin saving for retirement, with the first...

Your client is 40 years old. She wants to begin saving for retirement, with the first payment to come one year from now. She can save $15,000 per year, and you advise her to invest it in the stock market, which you expect to provide an average return of 10% in the future. a. If she follows your advice, how much money will she have at 65? Round your answer to the nearest cent. b. How much will she have...

Your client is 22 years old. She wants to begin saving for retirement, with the first...

Your client is 22 years old. She wants to begin saving for retirement, with the first payment to come one year from now. She can save $13,000 per year, and you advise her to invest it in the stock market, which you expect to provide an average return of 11% in the future. If she follows your advice, how much money will she have at 65? Round your answer to the nearest cent. How much will she have at 70?...

Your client is 24 years old. She wants to begin saving for retirement, with the first...

Your client is 24 years old. She wants to begin saving for retirement, with the first payment to come one year from now. She can save $4,000 per year, and you advise her to invest it in the stock market, which you expect to provide an average return of 9% in the future. If she follows your advice, how much money will she have at 65? Do not round intermediate calculations. Round your answer to the nearest cent. $ How...

Subjects