Question

Betty plans to begin saving one year from today. She will contribute $12,000 per year for 35 years and estimates that he can earn an annual rate of 6% on his savings. How much does she expect to have in 35 years?

• $1,325,217
• $1,337,217
• $1,424,710
• $1,471,437
• None of the above

Tam needs $4,000,000 when you retire in 40 years and can earn 8% on all invested funds. She will start contributing to your retirement account in a month. How much does she have to put into your retirement account every month?

• $1286.72
• $1,145.80
• $2329.45
• $27,953.39
• $15,440.65

Answer 1

>>>>

P = annual Contribution = $12,000

r = annual rate of interest = 6%

n = 35 years

Future Value of Annuity = P * [(1+r)^n - 1] / r

= $12,000 * [(1+6%)^35 - 1] / 6%

= $12,000 * 6.68608679 / 0.06

= $1,337,217.36

Therefore, amount in 35 years is $1,337,217

>>>>>

Future Value = $4,000,000

n = 40 * 12 = 480 months

r = monthly interest rate = 8%/12 = 0.66666667%

Let P = Monthly deposit

Future value = P * [(1+r)^n - 1] / r

$4,000,000 = P * [(1+0.66666667%)^480 - 1] / 0.66666667%

$26,666.6667 P * 23.2734241

P = $1,145.79903

Therefore, monthly deposit is $1,145.80