Question

In: Finance

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)

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

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jeff jeffy answered 2 years ago

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