You want to start saving for retirement. If you deposit $2,000 each year at the beginning of the next 60 years and earn 11% on the investment, how much will you have when you retire?
A) $9,510,132
B) $10,556,246
C) $792,000
D) $1,048,114

Question

Quizplus · Accepted Answer

This is a problem involving the future value of a series of annuities. Since the deposits are made at the beginning of each period, we use the future value of an annuity due formula: $FV = P \times \left(\frac{(1 + r)^n - 1}{r}\right) \times (1 + r)$, where $P$ is the annual payment, $r$ is the annual interest rate, and $n$ is the number of periods. Plugging in the values: $FV = 2000 \times \left(\frac{(1 + 0.11)^{60} - 1}{0.11}\right) \times (1 + 0.11)$, we get approximately $10,556,246.

You Want to Start Saving for Retirement