Question

In: Economics

Your current salary is $52,000 per year, and you are planning to retire in 25 years...

Your current salary is $52,000 per year, and you are planning to retire in 25 years from now. She anticipates that her salary will increase $3,000 each year, and she plans to deposit 5% of her yearly salary into a retirement fund that earns 7% interest compounded daily. What will be the amount of interest accumulated at the time of your retirement?

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Expert Solution

5% Deposit = 52000*0.05 = 2600

The amount increases by 3000*0.05 = 150

i = 7%

n = 25

effective interest rate = (1+0.07/365)^365-1 = 7.25%

The amount of interest accumulated:-

= 2600*(F/A,7.25%,25)+150*(F/G,7.25%,25)

= 2600*65.56559+150*559.523539

= 254399.065

Rahul Sunny answered 2 years ago
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