Question

You are planning for retirement 30 years from now. You plan to invest $3,600 per year for the first 6 years, $7,800 per year for the next 8 years, and $13,800 per year for the following 16 years (assume all cash flows occur at the end of each year). If you believe you will earn an effective annual rate of return of 12.1%, what will your retirement investment be worth 30 years from now?

Question 25 options:

	$53,557.98
	$1,648,134.07
	$1,470,235.57
	$60,038.49
	$739,847.38

Answer 1

We use the formula:  
A=P(1+r/100)^n
where   
A=future value
P=present value  
r=rate of interest
n=time period.

A=3600*(1.121)^29+3600*(1.121)^28+3600*(1.121)^27+3600*(1.121)^26+3600*(1.121)^25+3600*(1.121)^24+7800*(1.121)^23+7800*(1.121)^22+7800*(1.121)^21+7800*(1.121)^20+7800*(1.121)^19+7800*(1.121)^18+7800*(1.121)^17+7800*(1.121)^16+13800*(1.121)^15+13800*(1.121)^14+13800*(1.121)^13+13800*(1.121)^12+13800*(1.121)^11+13800*(1.121)^10+13800*(1.121)^9+13800*(1.121)^8+13800*(1.121)^7+13800*(1.121)^6+13800*(1.121)^5+13800*(1.121)^4+13800*(1.121)^3+13800*(1.121)^2+13800*(1.121)+13800

=$1,648,134.07(Approx)