A financial advisor tells you that you can make your child a millionaire if you just start saving early.You decide to put an equal amount each year into an investment account that earns 7.5% interest per year,starting on the day your child is born.How much would you need to invest each year (rounded to the nearest dollar)to accumulate a million for your child by the time he is 35 years old? (Your last deposit will be made on his 34th birthday.)
A) $6,525
B) $7,910
C) $12,500
D) $20,347

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 ($1,000,000), P is the annual payment, r is the annual interest rate (7.5% or 0.075), and n is the number of payments (35). Rearranging the formula to solve for P gives us P = FV / [((1 + r)^n - 1) / r]. Plugging in the numbers: P = $1,000,000 / [((1 + 0.075)^35 - 1) / 0.075] ≈ $6,525.

A Financial Advisor Tells You That You Can Make Your