Question

you are planning your retirement and you come to conclusions that you need to save 1,250,000 in 30 years. You can invest into a retirement accounts that guarantees you 5% annual return. how much do you put into account at the end of each year to reach your retirement goal?

Answer 1

equal amounts are deposited at the end of every year to accumulated 1,250,000 in 30 years.@5% interest.

since this series of cash flows is an ordinary annuity.

the amount to be deposited each year = future amount / [(1+r)^n-1 / r]

here,

future amount = $1,250,000

r = 5% =>0.05

n = 30 years.

=> amount to be deposited each year = $1,250,000 / [(1.05)^(30) - 1 / 0.05]

=>$1,250,000 / [ 3.32194238/0.05]

=>1250000/66.4388476

=>$18,814.29.

amount to be deposited each year = $18,814.29.