Mr.Hopper expects to retire in 25 years,and he wishes to accumulate $750,000 in his retirement fund by that time.If the interest rate is 10% per year,how much should Mr.Hopper put into his retirement fund each year in order to achieve this goal? (Assume that he makes payments at the end of each year.)
A)$4,559.44
B)$2,500
C)$7,626.05

Question

Quizplus · Accepted Answer

We can use the formula for the future value of an ordinary annuity to calculate how much Mr. Hopper should put into his retirement fund each year:

FV = PMT * ((1 + r)^n - 1) / r

where:
PMT = the annual payment Mr. Hopper needs to make
r = the interest rate per period (in this case, per year)
n = the number of payment periods (in this case, 25 years)

Plugging in the values given in the problem, we get:

$750,000 = PMT * ((1 + 0.1)^25 - 1) / 0.1

Solving for PMT, we get:

PMT = $7,626.05

Therefore, Mr. Hopper needs to put $7,626.05 into his retirement fund each year to achieve his goal of accumulating $750,000 in 25 years.

Option C is the closest to the calculated result.

MrHopper Expects to Retire in 25 Years,and He Wishes to Accumulate