Your job pays you only once a year, for all the work you did over the previous 1

Question

Your job pays you only once a year, for all the work you did over the previous 12 months. Today, December 31, you just received your salary of $41,000 and you plan to spend all of it. However, you want to start saving for retirement beginning next year. You have decided that one year from today you will begin depositing 2 percent of your annual salary in an account that will earn 8 percent per year. Your salary will increase at 5 percent per year throughout your career. How much money will you have on the date of your retirement 37 years from today?

Explanation / Answer

Future value of 1st year deposit = 41000*1.05*0.02*1.08^36 Future value of 1st year deposit = 41000*1.05^2*1.08^35*0.02 and so on Hence, value at retirement = $ 320,413.075 = ANSWER

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