Homework Help is Here – Start Your Trial Now!
Business
Finance
Assume that you contribute $5,000 per year to a retirement plan for 20 years. Then you are able to increase the contribution to $7,500 per year for another 20 years. Given an 8.0 percent interest rate, what is the value of your retirement plan after 40 years? Hint: This is equivalent to saving $5,000 each year for 40 years (from year 1 to year 40) and $2,500 each year for 20 years (from year 21 to year 40) O $$1,455,270 O $1,409,688 O $$1,492,875 $1,411,904

Assume that you contribute $5,000 per year to a retirement plan for 20 years. Then you are able to increase the contribution to $7,500 per year for another 20 years. Given an 8.0 percent interest rate, what is the value of your retirement plan after 40 years? Hint: This is equivalent to saving $5,000 each year for 40 years (from year 1 to year 40) and $2,500 each year for 20 years (from year 21 to year 40) O $$1,455,270 O $1,409,688 O $$1,492,875 $1,411,904

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
See similar textbooks
icon
Related questions
Question
Assume that you contribute $5,000 per year to a retirement plan for 20 years. Then you are able to increase the contribution to $7,500 per year for another 20 years. Given an 8.0 percent interest rate, what is the value of your retirement plan after 40 years? Hint: This is equivalent to saving $5,000 each year for 40 years (from year 1 to year 40) and $2,500 each year for 20 years (from year 21 to year 40) O $$1,455,270 O $1,409,688 O $$1,492,875 O $1,411,904
Transcribed Image Text:Assume that you contribute $5,000 per year to a retirement plan for 20 years. Then you are able to increase the contribution to $7,500 per year for another 20 years. Given an 8.0 percent interest rate, what is the value of your retirement plan after 40 years? Hint: This is equivalent to saving $5,000 each year for 40 years (from year 1 to year 40) and $2,500 each year for 20 years (from year 21 to year 40) O $$1,455,270 O $1,409,688 O $$1,492,875 O $1,411,904
Expert Solution
Step 1: Explain future value of annuity

The future value of annuity can be calculated using this formula

F V space o f space a n n u i t y equals P cross times open square brackets fraction numerator open parentheses 1 plus r close parentheses to the power of n minus 1 over denominator r end fraction close square brackets W h e r e comma P equals P e r i o d i c space p a y m e n t r equals I n t e r e s t space r a t e space p e r space p e r i o d n equals N u m b e r space o f space p e r i o d s


steps

Step by step

Solved in 3 steps with 2 images

SEE SOLUTIONCheck out a sample Q&A here
Blurred answer
Knowledge Booster
Investments
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
Essentials Of Investments
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
FUNDAMENTALS OF CORPORATE FINANCE
FUNDAMENTALS OF CORPORATE FINANCE
Finance
ISBN:
9781260013962
Author:
BREALEY
Publisher:
RENT MCG
Financial Management: Theory & Practice
Financial Management: Theory & Practice
Finance
ISBN:
9781337909730
Author:
Brigham
Publisher:
Cengage
Foundations Of Finance
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education
SEE MORE TEXTBOOKS