Question

After you graduate, you plan to work for another twenty years and then retire and move to a low-cost area. You think you can save $2500 a year for the first 5 years, and $3500 a year for the next 10 years, and $6000 a year for the last 5 years. If you can earn 3.5% a year on your savings in a reasonably safe investment, how much will you have from these savings when you retire?

Answer 1

We use the formula:  
A=P(1+r/100)^n
where   
A=future value
P=present value  
r=rate of interest
n=time period.

A=2500*(1.035)^19+2500*(1.035)^18+2500*(1.035)^17+2500*(1.035)^16+2500*(1.035)^15+3500*(1.035)^14+3500*(1.035)^13+3500*(1.035)^12+3500*(1.035)^11+3500*(1.035)^10+3500*(1.035)^9+3500*(1.035)^8+3500*(1.035)^7+3500*(1.035)^6+3500*(1.035)^5+6000*(1.035)^4+6000*(1.035)^3+6000*(1.035)^2+6000*(1.035)+6000

=$103401.05(Approx)