You would like to retire with $1,000,000. You plan on a 7% annual investment rate (3.5% semi-annually) and will put away $7,500 twice a year at the end of each semi-annual period. How long before you can retire? Round to the nearest figure.
A) 25 years
B) 35 years
C) 51 years
D) 66 years

Question

Quizplus · Accepted Answer

The correct answer is A.The future value of an annuity is given by the formula:FV = P * [(1 + r)^n - 1] / rwhere:P is the amount of each paymentr is the annual interest raten is the number of paymentsIn this case, we have:P = $7,500r = 3.5% semi-annually = 7% annuallyn = ?We want to find the value of n that will give us a future value of $1,000,000. Substituting the given values into the formula, we get:$1,000,000 = $7,500 * [(1 + 0.07)^n - 1] / 0.07Solving for n, we get:n = 50Since we are making payments twice a year, this means that it will take us 50 / 2 = 25 years to retire.

You Would Like to Retire with $1,000,000