1. Marsha wants to have $1 million in her 401(K) in 30 years. She wants to inves
ID: 2612704 • Letter: 1
Question
1. Marsha wants to have $1 million in her 401(K) in 30 years. She wants to invest $5,000 a year into the 401(K). About how much more than $5,000 a year will she need to invest each year to meet her goal of $1 million if all investments can earn 8%?
No additional amount as $5,000 a year will be enough to exactly meet her goal.
She will need to invest $3,828 more each year and meet her goal.
She can actually meet her goal by investing $1,091 less each year [investing $3,909 vice $5,000] and meet her goal.
She will need to invest about $11,029 more each year to meet her goal.
a.No additional amount as $5,000 a year will be enough to exactly meet her goal.
b.She will need to invest $3,828 more each year and meet her goal.
c.She can actually meet her goal by investing $1,091 less each year [investing $3,909 vice $5,000] and meet her goal.
d.She will need to invest about $11,029 more each year to meet her goal.
Explanation / Answer
correct option is "B" -she will need to invest $ 3,828 more each year and meet her goal
Future value = (annual cash flow *FVAF@8%,,30years) +(annual cash flow -additional *FVAF@8%,30years)
1,000,000 = (5000 * 113.2832 ) + (X *113.2832)
1,000,000 = 566,416.06 + 113.2832X
113.2832X = 1,000,000 -566,416.06
X = 433,583.94 / 113.2832
=$ 3827.43 (Approx 3828)
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