How long would it take for Nico to save an adequate amount for retirement if he deposits $40,000 per year into an account beginning one year from today that pays 12 percent per year if he wishes to have a total of $1,000,000 at retirement?
A) 15.0 years
B) 15.5 years
C) 14.5 years
D) 16.5 years

Question

Quizplus · Accepted Answer

The future value of an annuity is given by the formula:FV = P * [(1 + r)^n - 1] / rwhere:P is the annual paymentr is the annual interest raten is the number of yearsIn this case, we have:P = $40,000r = 12%FV = $1,000,000Solving for n, we get:n = log[(FV * r) / (P + FV * r)] / log(1 + r)= log[(1,000,000 * 0.12) / (40,000 + 1,000,000 * 0.12)] / log(1 + 0.12)= 15.0 yearsTherefore, it will take Nico 15 years to save an adequate amount for retirement.

How Long Would It Take for Nico to Save an Adequate