Ann Isabel, a recent graduate from Tech, would like to be a millionaire when she

Question

Ann Isabel, a recent graduate from Tech, would like to be a millionaire when she will retire after 30 years. She would like to start with a deposit of $1,000 at the end of the first year and increase it every year by $400 thereafter. What interest should she get to be able to retire as desired? A) 11.16 % B) 12.29% C) 14.98% D) 9.75%

Plz show all work. Thanks!

6. Ann Isabel, a recent graduate from Tech, would like to be a millionaire when she will retire after 30 years. She would like to start with a deposit of $1,000 at the end of the first year and increase it every year by $400 thereafter. What interest should she get to be able to retire as desired? A) 11.16% B) 12.29% C) 14.98% D) 9.75%

Explanation / Answer

FV = $1000000

interest rate = r

Deposit (1st year) = $1000 (increases by $400 every year = gradient)

time period = 30 years

1000 x (1 + r)29 + (1000 + 1 x 400) x (1 + r)28 + ..... + (1000 + 29 x 400) x (1 + r)0 = 1000000

Solve for 'r':

r = 12.36%

Correct option B

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