An investor plans to retire at age 60,with a total savings of $1,000,000.If she is currently 35 years old,has no savings,and expects to earn 8% per year on her investments,how much money must she set aside every year?

Question

Quizplus · Accepted Answer

To find out how much money the investor must set aside every year, we can use the present value annuity formula. We know the present value (PV) is $0, the future value (FV) is $1,000,000, the interest rate (r) is 8%, and the number of periods (n) is (60-35) = 25 years. Plugging these values into the formula, we get:

PMT = FV / [(1 + r)^n - 1] / r
PMT = 1,000,000 / [(1 + 0.08)^25 - 1] / 0.08
PMT = $13,679

Therefore, the investor must set aside $13,679 every year to achieve her retirement goal. The answer is B.

An Investor Plans to Retire at Age 60,with a Total