) Your strange neighbor from down the street heard that you were an aspiring acc
ID: 2471498 • Letter: #
Question
) Your strange neighbor from down the street heard that you were an aspiring accountant and asked you for advice regarding his retirement plan. Specifically, he wants to retire in 30 years and has never contributed to a retirement plan. Respond to the following questions:
A) If he contributes $6,500 at the beginning of each year for 30 years and the return on his investment is 6% per year, how much money will be in his account when he is ready for retirement?
B) If your strange neighbor wanted to have $2,000,000 in his account when he retires and wanted to invest at the end of each year, how much would he have to invest per year assuming a rate of return of 8%?
Explanation / Answer
Future Value = Cash Flow(1+r)n From the annuity table FV = 6500(1+.06)30+(1+.06)29….(1+.06) 6500*83.80 544700 At retiremebt he will have $ 544700 B) FV = cash Flow (1+r)n 2000000= x*122.34 X = 2000000/122.34 16347.88 He has ro invest per year $ 16348 to have $ 2000000 after 30 years
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