Question

Dorothy plans to retire in 45 years. If she saves $7400 per year and earns 8.0% interest, compounded annually, approximately how much money will she have in her account when she retires?

A) $2.9 million

B) $1.9 million

C) $5000000

D) $2100000

Answer 1

Periodic saving each year for 45 years till retirement is $7400

Calculating the accumulated value at the time of retirement using future value of ordinary annuity formula:-

Where, C= Periodic Savings = $7400

r = Periodic Interest rate = 8%

n= no of periods = 45

Future Value = $2,860,141.57 or 2,900,000 (approximately)

So, money she will have in her account when she retires is $2.9 million(approximately)

Option A

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