Question

You want to retire in 46 years with $10,000,000. You plan to start saving next year...

You want to retire in 46 years with $10,000,000. You plan to start saving next year and then growing each retirement contribution by 1% per year. You are confident that you can compound your savings at 9% per year. How much must your first payment be?

(future value of growing annuity problem) - please show work

Homework Answers

Answer #1

Using goal seek

first payment is 15656.72

Future value of Growing annuity = P/(r - g) × [ (1+r)n - (1+g)n]
P= Periodic payment 15,656.72
g= Growth rate 1%
r= Rate of interest per period:
Annual rate of interest 9.00000%
Frequency of payment once in every 12 months
Payments per year 12/ 12= 1
Interest rate per period 0.09/1= 9.00000%
n= number of payments:
Number of years 46
Payments per year 1
number of payments 46
Future value of annuity= 15656.72/(0.09 - 0.01) × [ (1 + 0.09 )^46 - (1+ 0.01)^46 ]
Future value of annuity=                        10,000,002.45
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