Edward wishes to save enough money to purchase a retirement lake cabin.He is willing to spend $500,000 for the cabin and he can save $25,000 per year and invest the money into an account earning 8.00% per year.If Edward's investments come in the form of equal annual end-of-the-year cash flows and the first cash flow is in exactly one year,how long will it take him to save enough money to buy the lake cabin?
A)Between 8 and 9 years
B)Between 10 and 11 years
C)Between 12 and 13 years
D)Exactly 20 years

Question

Quizplus · Accepted Answer

Using the future value of an annuity formula, it will take Edward between 12 and 13 years to accumulate $500,000 with annual savings of $25,000 at an 8% interest rate.

Edward Wishes to Save Enough Money to Purchase a Retirement