Today is January 1, 2010 and you currently have $300,000 in your retirement fund
ID: 2625576 • Letter: T
Question
Today is January 1, 2010 and you currently have $300,000 in your retirement fund. You will deposit $15,000 on December 31st of each of the next five years (beginning December 31, 2010) and $20,000 on December 31st of the next five years. Assuming that you will earn 4.50% consistently, how much will you have in your retirement fund on January 1, 2020?
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Explanation / Answer
Rate of return r 4.50% Formula Case -> A Cash flow PV of Cash flow Year Cash flow FV of cash flow A A*(1+r)^10 0 300,000 $ 465,890.83 B B*(1+r)^9 1 15,000 $ 22,291.43 C C*(1+r)^8 2 15,000 $ 21,331.51 D D*(1+r)^7 3 15,000 $ 20,412.93 E E*(1+r)^6 4 15,000 $ 19,533.90 F F*(1+r)^5 5 15,000 $ 18,692.73 G G*(1+r)^4 6 20,000 $ 23,850.37 H H*(1+r)^3 7 20,000 $ 22,823.32 I I*(1+r)^2 8 20,000 $ 21,840.50 J J*(1+r)^1 9 20,000 $ 20,900.00 K K*(1+r)^0 10 20,000 $ 20,000.00 Sum of above FVs of cash flow Future worth $ 677,567.52 = ANswer
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