Question

Mary's 25th birthday is today, and she hopes to retire on her 65th birthday. She has determined that she will need to have $3,000,000 in her retirement savings account in order to live comfortably. Mary currently has no retirement savings, and her investments will earn 4% annually.
a. How much must she deposit into her account at the end of each of the next 40 years to meet her retirement savings goal?

Answer 1

Answer:

Annual deposit= $31,570.47

Explanation:

Giving the following information:

She has determined that she will need to have $3,000,000 in her retirement savings account.

Her investments will earn 4% annually.

To calculate the annual deposit we need to use the following formula:

FV= {A*[(1+i)^n-1]}/i

A= annual deposit

Isolating A:

A= (FV*i)/{[(1+i)^n]-1}

A= (3,000,000*0.04)/[(1.04^40)-1]= $31,570.47