When you retire 40 years from now,you want to have $1.2 million.You think you can earn an average of 12 percent on your investments.To meet your goal,you are trying to decide whether to deposit a lump sum today,or to wait and deposit a lump sum 2 years from today.How much more will you have to deposit as a lump sum if you wait for 2 years before making the deposit?
A)$1,414.14
B)$2,319.47
C)$2,891.11
D)$3,280.78
E)$3,406.78

Question

Quizplus · Accepted Answer

Present value = $1,200,000 × [1/(1 + .12)⁴⁰] = $12,896.16Present value = $1,200,000 × [1/(1 + .12)³⁸] = $16,176.94Difference = $16,176.94 - $12,896.16 = $3,280.78

When You Retire 40 Years from Now,you Want to Have