Question

Suppose that you are age 25 today and plan on retiring at age 65. You determined that you need to have saved $437485 in real dollars by the time you retire. How much must you contribute (in real dollars) each year to your retirement account to achieve your goal? Assume the following: you make annual contributions; each contribution is the same amount in real dollars; the first contribution will be one year from today; your last contribution will be at age 65; your portfolio earns a real annual rate of return of 7.15%, compounded annually. Do not round at intermediate steps in your calculation. Round your answer to the nearest dollar. Do not type the $ symbol.

Answer 1

Amount Required = $437,485

Time Period = 40 years

Interest Rate = 7.15% annually

Calculating Annual Contribution,

Using TVM Calculation,

PMT = [PV = 0, FV = 437,485, T = 40, I = 0.0715]

PMT = $2,108.18

Annual Deposit = $2,108.18