Question

You are saving for retirement. To live​ comfortably, you decide you will need to save $2 million by the time you are 65. Today is your 33rd birthday, and you​ decide, starting today and continuing on every birthday up to and including your 65th ​birthday, that you will put the same amount into a savings account. If the interest rate is 6%​, how much must you set aside each year to make sure that you will have $2 million in the account on your 65th ​birthday?

Answer 1

Future value of annuity due= payment per period * [(1+i)^n-1]/i *(1+i)

i = interest rate per period

n = number of periods

=>

deposit per period * [(1+0.06)^32 - 1]/0.06 * (1+0.06) = 2000000

=>

deposit per period = 20759.13