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 $4,000,000 in her retirement savings account in order to live comfortably. Mary currently has no retirement savings, and her investments will earn 5% annually. 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:

Annuity will be $33112.644  

Explanation:

We have given future value ( FV ) = $4000000

Rate of interest r = 5% = 0.05

Number of periods n = 40

We know that future value is given by $Futurte\ value(FV)=\frac{A}{r}[(1+r)^n-1]$

Here A is annuity

So $4000000=\frac{A}{0.05}[(1+0.05)^{40}-1]$

$200000=A[(1+0.05)^{40}-1]$

$200000=A\times 6.0399$

$A= 33112.644$

So annuity will be $33112.644