Question

You would like to start saving for retirement. Assuming you are now 20 years old and you want to retire at age 60, you have 40 years to watch your investment grow. You decide to invest in the stock market, which has earned about 10% per year over the past 80 years and is expected to continue at this rate. You decide to invest $1,000 at the end of each year for the next 40 years.

Required:
Calculate how much your accumulated investment is expected to be in 40 years. (FV of $1, PV of $1, FVA of $1, and PVA of $1) (Use appropriate factor(s) from the tables provided. Round your answer to 2 decimal places.)

Accumulated Investment Amount= ??

Answer 1

FV of annuity
P = PMT x ((((1 + r) ^ n) - 1) / r)
Where:
P = the future value of an annuity stream	P
PMT = the dollar amount of each annuity payment	$         1,000
r = the effective interest rate (also known as the discount rate)	10%
n = the number of periods in which payments will be made	40
Accumulated investment amount=	PMT x ((((1 + r) ^ n) - 1) / r)
Accumulated investment amount=	1000*((((1 + 10%) ^40) - 1) / 10%)
Accumulated investment amount=	$442,592.56