Creating a retirement fund - To supplement your planned retirement in exactly 35

Question

Creating a retirement fund - To supplement your planned retirement in exactly 35

years, you estimate that you need to accumulate $300,000 by the end of 35 years

from today. You plan to make equal, annual, end-of-year deposits into an account

paying 6% annual interest.

a. How large must the annual deposits be to create the $300,000 fund by the end of

35 years?

b. If you can afford to deposit only $550 per year into the account, how much will

you have accumulated by the end of the third-fifth year?

Explanation / Answer

Answer a) is $ 2,692.16

Answer b) is $ 61,289.13

Explintions in the tble below:

Table for question a

Table for question b

Number of Years Money Deposited Amount of Total Corpus Remarks/ Formula 1 $2,692.16 $2,692.16 = $2692 (Zero Interest is added since money was paid at the end of year) 2 $2,692.16 $5,545.85 =2692.16+ (2692.16*1.06*1) {Sum deposited at end of period + Amount including interest for the sum accumulated in the previous year } 3 $2,692.16 $8,570.76 =2692.16+ (5545.85*1.06*1) {Sum deposited at end of period + Amount including interest for the sum accumulated in the previous year } 4 $2,692.16 $11,777.17 5 $2,692.16 $15,175.96 6 $2,692.16 $18,778.67 7 $2,692.16 $22,597.55 8 $2,692.16 $26,645.57 9 $2,692.16 $30,936.46 10 $2,692.16 $35,484.81 11 $2,692.16 $40,306.06 12 $2,692.16 $45,416.58 13 $2,692.16 $50,833.74 14 $2,692.16 $56,575.92 15 $2,692.16 $62,662.64 16 $2,692.16 $69,114.55 17 $2,692.16 $75,953.59 18 $2,692.16 $83,202.96 19 $2,692.16 $90,887.30 20 $2,692.16 $99,032.70 21 $2,692.16 $1,07,666.82 22 $2,692.16 $1,16,818.99 23 $2,692.16 $1,26,520.29 24 $2,692.16 $1,36,803.66 25 $2,692.16 $1,47,704.04 26 $2,692.16 $1,59,258.45 27 $2,692.16 $1,71,506.11 28 $2,692.16 $1,84,488.64 29 $2,692.16 $1,98,250.12 30 $2,692.16 $2,12,837.29 31 $2,692.16 $2,28,299.68 32 $2,692.16 $2,44,689.82 33 $2,692.16 $2,62,063.37 34 $2,692.16 $2,80,479.34 35 $2,692.16 $3,00,000.26 This is the resulting amount,

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