When you retire thirty years from now, you want to have $750,000. You think you can earn an average of 9% on your money. To meet this goal, you are trying to decide whether to deposit a lump
Sum today, or to wait and deposit a lump sum ﬁve years from today. How much more will you have
To deposit as a lump sum if you wait for ﬁve years before making the deposit?
A) $28,788.03
B) $29,414.14
C) $30,447.52
D) $36,118.09
E) $38,278.27

Question

Quizplus · Accepted Answer

If you wait five years, you have 25 years to grow your money instead of 30. The present value of $750,000 in 25 years at 9% is $750,000 / (1.09)^25. The present value of $750,000 in 30 years at 9% is $750,000 / (1.09)^30. The difference between these two amounts is the additional amount you need to deposit if you wait five years. This difference is $30,447.52.

When You Retire Thirty Years from Now, You Want to Have