How many years would it take for Jughead to save an adequate amount for retirement if he deposits $2,000 per month into an account beginning today that pays 12 percent per year if he wishes to have a total of $1,000,000 at retirement?
A) 13 years
B) 16 years
C) 15 years
D) 12 years

Question

Quizplus · Accepted Answer

Using the formula for future value of an annuity:

FV = (PMT x ((1 + r)^n - 1) / r)

Where PMT is the monthly deposit, r is the monthly interest rate (12%/12 = 1% per month), and n is the number of months.

We can solve for n:

1,000,000 = (2,000 x ((1 + 0.01)^n - 1) / 0.01)

1,000,000 * 0.01 = 2,000 x ((1.01)^n - 1)

10,000 = (1.01^n - 1)

1.01^n = 1 + 10,000

n = log(1 + 10,000) / log(1.01)

n ≈ 179.99 months, or 15 years.

How Many Years Would It Take for Jughead to Save