How many years would it take for Harry to save an adequate amount for retirement if he deposits $2,000 per month into an account beginning today that pays 12 percent per year if he wishes to have a total of $1,000,000 at retirement?
A)13 years
B)16 years
C)15 years
D)12 years

Question

Quizplus · Accepted Answer

We can use the formula for future value of an annuity to calculate the number of years it would take for Harry to save $1,000,000:

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

where FV is the future value, P is the monthly deposit, r is the annual interest rate divided by 12, and n is the number of months.

Substituting in the given values, we get:

$1,000,000 = $2,000 * (((1 + 0.12/12)^n - 1) / (0.12/12))

Simplifying this equation, we can solve for n:

n = log(1 + ($1,000,000 / $2,000) * (0.12/12)) / log(1 + 0.12/12)

n ≈ 180.81

Therefore, it would take approximately 15 years for Harry to save $1,000,000 for retirement. The closest answer choice is C.

How Many Years Would It Take for Harry to Save