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 deposit today, you need to find the present value of $750,000 discounted at 9% for 30 years. If you wait 5 years, you need to find the present value of $750,000 discounted at 9% for 25 years. The difference between these two present values is the additional amount you need to deposit if you wait 5 years. Calculating these, the difference is $30,447.52.

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