John would like to save $1,500,000 by the time he retires in 30 years and believes he can earn an annual return of 8%. How much does he need to invest each year to achieve his goal?
A) $13,242
B) $18,900
C) $20,518
D) None of the above

Question

Quizplus · Accepted Answer

To find the annual investment needed, we use the future value of an annuity formula: FV = Pmt * [(1 + r)^n - 1] / r. Solving for Pmt gives us Pmt = FV / [(1 + r)^n - 1] / r. Plugging in the values: FV = $1,500,000, r = 0.08, n = 30, we find Pmt ≈ $13,242.

John Would Like to Save $1,500,000 by the Time He