Question

Suppose Adam wants to have $750,000 in his IRA at the end of 30 years. He decides to invest in an annuity paying 6% interest, compounded annually. What does he have to contribute each year to reach this goal?

Answer 1

Answer:

  $9486.68

Step-by-step explanation:

The future value of a annuity formula can be used:

  FV = P((1+r)^n -1)/r

  750000 = P(1.06^30 -1)/0.06

  P = 750000(.06)/(1.06^30 -1) = 9486.68

Adam has to contribute $9,486.68 each year to reach his goal.