Suppose that you have estimated that,to provide for your retirement income,you will need $2,250,000 on deposit in your retirement account when you retire.You believe that you will earn an average of 11% on your retirement investments until you retire in 35 years.What must your annual deposits be to accumulate this total?

Question

Quizplus · Accepted Answer

We can use the formula for Future Value of an Annuity to solve for the annual deposits needed to accumulate $2,250,000 in 35 years with an interest rate of 11%.

Future Value = Annual Deposit x [(1 + r)^n - 1] / r

Where:
r = annual interest rate = 11%
n = number of years until retirement = 35
Future Value = $2,250,000

Substituting the values:

$2,250,000 = Annual Deposit x [(1 + 0.11)^35 - 1] / 0.11

Simplifying:

Annual Deposit = $6,586.85

Therefore, the annual deposits needed to accumulate $2,250,000 in 35 years with an interest rate of 11% is $6,586.85. Option B is the correct answer.

Suppose That You Have Estimated That,to Provide for Your Retirement