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A 22-year-old engineering graduate wants to accumulate $2,000,000 to be avail-able when she retires 40 years from today. She investigates several investment options and decides to invest in a stock market index fund after discovering that the long-term average return for the stock market is 10.4 percent per year. Since this will be a tax-sheltered account, she plans to ignore the impact of taxes.
a. If she plans to make 40 uniform annual deposits starting 1 year from today, what is the dollar amount of the required deposits?
b. If she makes the ?rst of the 40 deposits starting today rather than 1 year from today, what is the dollar amount of the required deposits?
c. If she plans to make the ?rst payment 1 year from today and each annual payment will be $200 greater than the previous year?s payment,
(i) what is the dollar amount of the ?rst deposit?
(ii) what is the dollar amount of the last deposit?
d. If she plans to make the ?rst payment 1 year from today and each annual payment will be 5 percent greater than the previous year?s payment,
(i) what is the dollar amount of the ?rst deposit?
(ii) what is the dollar amount of the last deposit?
Dear Student
As this is a topic that is above the level that we at Ask & Answer can provide help with, I would encourage you to check with your teacher/professor for additional help. We encourage you to come back if you need any help in the areas that we are able to provide assistance in.
Regards
As this is a topic that is above the level that we at Ask & Answer can provide help with, I would encourage you to check with your teacher/professor for additional help. We encourage you to come back if you need any help in the areas that we are able to provide assistance in.
Regards