Question

You want to accumulate $3 million by your retirement date, which is 25 years from now. You will make 25 deposits in your bank, with the first occurring today. The bank pays 10% interest, compounded annually. You expect to receive annual raise of 5%, which will offset inflation, and you will let the amount you deposit each year also grow by 5% (i.e., your second deposit will be 5% greater than your first, the third will be 5% greater than the second, etc.). How much must your first deposit be if you are to meet your goal? Do not round intermediate calculations. Round your answer to the nearest cent. Enter your answer as a positive value.

Answer 1

x*(1-(1.05/1.1)^25)/(1-(1.05/1.1))*1.1^25=3000000
=>x=3000000*(1-(1.05/1.1))/(1-(1.05/1.1)^25)*1/1.1^25
=>x=18307.89611