Question

You are saving for retirement. To live comfortably, you decide you will need to save $2,000,000 by the time you are 65. Today is your 30th birthday and you decide, starting today and continuing on every birthday up to and including your 64th birthday, that you will put the same amount into a savings account. If the interest rate is 5%, how much must you set aside each year to make sure you will have $2,000,000 in the account on you 65th birthday? Hint: n = 35.

Your grandmother has been putting $1000 into a savings account on every birthday since your first (that is, when you turned 1). The account pays an interest rate of 3%. How much money will be in the account on your 18th birthday immediately after your grandmother makes the deposit on that birthday? Hint n=18.

Your grandfather bought an annuity from Rock Solid Life Insurance Company for $200,000 when he retired. In exchange for the $200,000, Rock Solid will pay him $25,000 per year until he dies. The interest rate is 5%. How long must he live after the day he retired to come out ahead (that is, to get more in value than what he paid in)?

Answer 1

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