Question

assume you currently have $215,000 that you are ready to invest for retirement. In addition, you...

assume you currently have $215,000 that you are ready to invest for retirement. In addition, you plan to save

$8,500 per year at the end of each year for years 1-9

$13,000 at the end of year 10

$18,500 per year at the end of each year for years 11-18

Assuming you earn 8.7% as an annual rate of return, how much will you have 18 years from today when you retire?

Homework Answers

Answer #1

Amount Invested today = $215,000
Investment in Years 1-9 = $8,500
Investment in Year 10 = $13,000
Investment in Years 11-18 = $18,500

Annual Rate of Return = 8.70%

Accumulated Sum = $215,000*1.087^18 + $8,500*1.087^17 + $8,500*1.087^16 + ... + $8,500*1.087^9 + $13,000*1.087^8 + $18,500*1.087^7 + $18,500*1.087^6 + $18,500*1.087^5 + ... + $18,500
Accumulated Sum = $215,000*1.087^18 + ($8,500*1.087^9)*(1.087^9 - 1)/0.087 + $13,000*1.087^8 + $18,500*(1.087^8 - 1)/0.087
Accumulated Sum = $965,095.42 + $231,564.75 + $25,338.43 + $201,822.24
Accumulated Sum = $1,423,820.84

So, balance at the time of retirement is $1,423,820.84

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