Question

Creating a retirement fund  Personal Finance Problem   To supplement your​ retirement, you estimate that you need to accumulate

​$230,000

exactly

40

years from today. You plan to make​ equal, end-of-year deposits into an account paying  

7%

annual interest.a.  How large must the annual deposits be to create the

​$230,000

fund by the end of

40

​years?b.  If you can afford to deposit only

​$960

per year into the​ account, how much will you have accumulated in

40

​years?

a.  The annual deposits to create the

​$230,000

fund by the end of

40

years should be

​$nothing.

​ (Round to the nearest​ cent.)b. If you can afford to deposit only

​$960

per year into the​ account, by the end of

40

years you will have

​$nothing.

​ (Round to the nearest​ cent.)

Answer 1

FVOrdinary Annuity = C*(((1 + i/100)^n -1)/(i/100))

C = Cash flow per period

i = interest rate

n = number of payments

230000= Cash Flow*(((1+ 7/100)^40-1)/(7/100))

Cash Flow = 1152.1

Using Calculator: press buttons "2ND"+"FV" then assign

FV =230000

I/Y =7

N =40

PV = 0

CPT PMT

Using Excel

=PMT(rate,nper,pv,fv,type)

=PMT(7/(100),40,,230000,)

FVOrdinary Annuity = C*(((1 + i/100)^n -1)/(i/100))

C = Cash flow per period

i = interest rate

n = number of payments

FV= 960*(((1+ 7/100)^40-1)/(7/100))

FV = 191649.71

Using Calculator: press buttons "2ND"+"FV" then assign

PMT =-960

I/Y =7

N =40

PV = 0

CPT FV

Using Excel

=FV(rate,nper,pmt,pv,type)

=FV(7/(100),40,-960,,)