You want to have $1 million in real dollars in an account when you retire in 30
ID: 2727012 • Letter: Y
Question
You want to have $1 million in real dollars in an account when you retire in 30 years. The nominal return on your investment is 8 percent and the inflation rate is 4.6 percent.
What real amount must you deposit each year to achieve your goal? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
You want to have $1 million in real dollars in an account when you retire in 30 years. The nominal return on your investment is 8 percent and the inflation rate is 4.6 percent.
Explanation / Answer
real rate of interest = 8% + 4.6%
= 12.6%
amount to deposit each year = 1000000/ annuity value @12.6 % for 30 years
= 1000000/305.35
= $ 3275
workings
YEARS OPENING INTEREST CLOSING AMOUNT 1 3275.038 412.6547 3687.692408 2 6962.73 877.304 7840.03406 3 11115.07 1400.499 12515.57076 4 15790.61 1989.617 17780.22508 5 21055.26 2652.963 23708.22585 6 26983.26 3399.891 30383.15472 7 33658.19 4240.932 37899.12462 8 41174.16 5187.944 46362.10673 9 49637.14 6254.28 55891.42459 10 59166.46 7454.974 66621.4365 11 69896.47 8806.956 78703.42991 12 81978.47 10329.29 92307.75448 13 95582.79 12043.43 107626.224 14 110901.3 13973.56 124874.8206 15 128149.9 16146.88 144296.7404 16 147571.8 18594.04 166165.8221 17 169440.9 21349.55 190790.4081 18 194065.4 24452.25 218517.6919 19 221792.7 27945.88 249738.6135 20 253013.7 31879.72 284893.3712 21 288168.4 36309.22 324477.6284 22 327752.7 41296.84 369049.502 23 372324.5 46912.89 419237.4316 24 422512.5 53236.57 475749.0404 25 479024.1 60357.03 539381.1119 26 542656.1 68374.67 611030.8244 27 614305.9 77402.54 691708.4007 28 694983.4 87567.91 782551.3516 29 785826.4 99014.13 884840.5143 30 888115.6 111902.6 1000018.111Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.