Question

How many years would it take for Jughead to save an adequate amount for retirement if he deposits $2,000 per month into an account beginning today that pays 12 percent per year if he wishes to have a total of $1,000,000 at retirement?

Group of answer choices

41.6 years

14.9 years

13.7 years

11.5 years

15.6 years

Please show work. Thank you so much!

Answer 1

Information provided:

Future value (FV)= $1,000,000

Monthly deposit= $2,000

Monthly interest rate= 12%/12= 1%

The question is solved by calculating the time period of annuity due.

This can be solved using a financial calculator by entering the below into the calculator:

The financial calculator is set in the end mode. Annuity due is calculated by setting the calculator to the beginning mode (BGN). To do this, press 2^ndBGN 2^ndSET on the Texas BA II Plus calculator.

Enter the below in a financial calculator to compute the time of the bond:

FV= 1,000,000

PMT= 2,000

I/Y= 1

Press the CPT key and N to compute the time of the deposit.

The value obtained is 179.2377.

= 179.2377/12

= 14.9 years.

Hence, the answer is option b.