Question

Sue wants to save $1,000,000 in twenty years. She estimates she can earn 8.5 percent on savings. She intends to make deposits at the beginning of every year in a series of equal payments starting today. How much does she need to save each year to reach her goal?

Answer 1

Future Value to be saved by Sue in 20 years = $1,000,000

Calculating the periodic annual savings at the beginning of every year using Future Value of annuity due formula:-

Where, C= Periodic Annual Savings

r = Periodic Interest rate = 8.5%

n= no of periods = 20

C = $19,051.59

So, amount to be saved each year to reach goal is $19,051.59

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