Question

You are currently 25 years of age. You have developed a lifetime budget that includes $50,000 at age 40 for a college fund for your kids and $25,000 per year for 20 years to supplement your retirement, the first payment on your 60^th birthday and the last payment on your 79^th birthday. You open an investment account on your 25^th birthday that promises to pay 9% interest compounded annually. You want to deposit equal annual amounts into the account every year on your birthday, starting today (your 25^th birthday) and continuing until you are 40 years old (i.e., the last deposit is made on your 40^th birthday). How much will each deposit have to be if you want to meet your financial goals?

Answer 1