trevor smith wants to have a million dollars at retirement which is 15 years awa
ID: 2804036 • Letter: T
Question
trevor smith wants to have a million dollars at retirement which is 15 years away. he already has 200,000 in an IRA earning 9 percent annually. How much does he need to save each year beginning at the end of the year to reach his target? Assume he could earn 9 percent on any investment he makes. trevor smith wants to have a million dollars at retirement which is 15 years away. he already has 200,000 in an IRA earning 9 percent annually. How much does he need to save each year beginning at the end of the year to reach his target? Assume he could earn 9 percent on any investment he makes.Explanation / Answer
Value of $200,000 in IRA @9% interest at the end of 15 years= present value*(1+interest rate)^(no of years)= $200,000*(1+0.09)^15=$728,496
so the remaining target = $1,000,000-$728,496=$271,504
Annuity payment that needs to be made every year to meet $271,504 at end of 15 years = (Future value*rate)/(((1+rate)^no of years)-1)= ($271,504*0.09)/(((1+0.09)^15)-1)=$9247.11
the answer is $9247.11 each year
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