When you retire forty years from now, you want to have $1 million. You think you can earn an average of 8.5% 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) $18,001.06
B) $18,677.78
C) $18,998.03
D) $19,272.81
E) $21,036.83

Question

Quizplus · Accepted Answer

If you wait five years, you will have 35 years to grow your investment instead of 40. The future value formula is used to calculate the present value needed for both scenarios, and the difference between them is the additional amount required if you wait.

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