Question

What is the matured future value of a 25 year retirement plan that is based on an interest rate of 7%, and a geometrically increasing annual payment that starts at $1000/ year and increases by 1% annually and draw the cash flow?

Answer 1

Annual payment = $ 1,000

Geometric growth =.1%

Interest rate = 7%

Time = 26 years

First converting it to present value

Now convert it to future worth

After 25 years the amount in pocket = $ 69,083

Future value = $ 69,083