How much must be saved annually,beginning 1 year from now,in order to accumulate $50,000 over the next 10 years,earning 9% annually?
A) $3,291
B) $3,587
C) $4,500
D) $4,587

Question

Quizplus · Accepted Answer

The correct answer is A.The future value of $1 at 9% for 10 years is $1.9926. So, to accumulate $50,000, we need to save $50,000 / 1.9926 = $25,100. Since we are saving for 10 years, we need to save $25,100 / 10 = $2,510 per year. However, since we are not starting to save until 1 year from now, we need to save $2,510 * 1.09 = $2,736 in the first year. So, the correct answer is A.

How Much Must Be Saved Annually,beginning 1 Year from Now,in