Ian would like to save $2,000,000 by the time he retires in 40 years. If he believes that he can achieve a 7% rate of return, how much does he need to deposit each year, starting one year from now, to achieve his goal?
A)$12,065
B)$37,500
C)$5,790
D)$10,018

Question

Quizplus · Accepted Answer

To find the annual deposit needed, we use the future value of an annuity formula: FV = Pmt * [(1 + r)^n - 1] / r. Solving for Pmt, we get Pmt = FV / [(1 + r)^n - 1] / r. Plugging in FV = $2,000,000, r = 0.07, and n = 40, we find Pmt ≈ $10,018.

Ian Would Like to Save $2,000,000 by the Time He