Question

Alonzo plans to retire as soon as he has accumulated $250,000 through quarterly payments of $2,600. If Alonzo invests this money at 5.4% interest, compounded quarterly, when (to the nearest year) can he retire?(

Answer 1

We can use financial calculator for calculation of no. of years with below keystrokes:

FV = future value = $250,000; PMT = quarterly payments = -$2,600; I/Y = quarterly interest rate = 5.4%/4 = 1.35‬%; PV = present value = $0 > CPT = compute > N = no. of quarters = 62.05

PMT needs to be entered as negative value because it's a cash outflow.

no. of years = no. of quarters/no. of quarters in a year = 62.05/4 = 15.5 or 16 years

he can retire in 16 years (to the nearest year).