Question

# I selected the target fund retirement 2065(3-yr) and the average annual return I will use is...

I selected the target fund retirement 2065(3-yr) and the average annual return I will use is 7.25%

If you invest the amount you are saving every year(\$1,092.00) on this fund, for the next 10 years, how much will you have when you reach 65(21 today)?

I will have \$___________ when I reach 65.

CALCULATIONS: I applied the Future Value of Annuity Formula and FV formula (I'm not sure) to solve it, with the following inputs:

#### Homework Answers

Answer #1

- Periodic annual annuity for 10 years = \$1092

After 10 years, only Interest will accumulate till you reach your age 65.

In Calculating Future Value at year end 65 we will use FV of ordinary annuity formula for periodic annuity and then compound the resultant till age 65:-

Where, C= Periodic Payments = \$1092

r = Periodic Interest rate = 7.25%

n= no of periods of annuity = 10 years

m = no of years of Interest compounding = (65 years - 21 years -10 years) = 34 years

Future Value = \$164,914.59

So, amount you will have when you reach 65 is \$164,914.59

If you need any clarification, you can ask in comments.

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