Shenli would like to plan for retirement. With the help of a financial planner, she estimates that she will need $2,300,000 when she retires 40 years from now. Assume her investments produce returns of 10% per year. How much would Shenli need to save each year if she makes equal end of year deposits for the next 40 years that she works? Click here to access the TVM Factor Table calculator. $ Carry all interim calculations to 5 decimal places and then round your final answer to a whole number. The tolerance is ±5.
Shenli would like to plan for retirement. With the help of a financial planner, she estimates that she will need $2,300,000 when she retires 40 years from now. Assume her investments produce returns of 10% per year. How much would Shenli need to save each year if she makes equal end of year deposits for the next 40 years that she works? Click here to access the TVM Factor Table calculator. $ Carry all interim calculations to 5 decimal places and then round your final answer to a whole number. The tolerance is ±5.
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
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Transcribed Image Text:Shenli would like to plan for retirement. With the help of a financial planner, she estimates that she will need $2,300,000 when she
retires 40 years from now. Assume her investments produce returns of 10% per year. How much would Shenli need to save each year if
she makes equal end of year deposits for the next 40 years that she works?
Click here to access the TVM Factor Table calculator.
Carry all interim calculations to 5 decimal places and then round your final answer to a whole number. The tolerance is ±5.
Expert Solution
Introduction;
Amount required after 40 years (FV) = $2,300,000
Rate of return (r) = 0.10 or 10%
Period (n) = 40 years
Amount need to save each year (C) = ?
The future value is compounded value of all the periodic deposits using appropriate rate of return.
We will use future value of ordinary annuity formula.
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