How much would need to be contributed each year for 30 years to accumulate $1,300,000 assuming a return on the investments of 8%? Round to the nearest dollar if needed.
A) $43,333
B) $46,800
C) $11,476
D) $15,000

Question

Quizplus · Accepted Answer

To solve this, we use the formula for the future value of a series of annuities: FV = P * [((1 + r)^n - 1) / r], where FV is the future value ($1,300,000), P is the annual payment, r is the annual interest rate (8% or 0.08), and n is the number of payments (30 years). Rearranging the formula to solve for P gives us P = FV / [((1 + r)^n - 1) / r]. Plugging in the numbers: P = $1,300,000 / [((1 + 0.08)^30 - 1) / 0.08] ≈ $11,476.

How Much Would Need to Be Contributed Each Year for 30