Question

PRINTER VERSION BACK NEXT Question 14 x Your answer is incorrect. Try again. Jason Allen is 30 years and wants to retire when he is 65. So far he has saved (1) $6,960 in an IRA account in which his money is earning 8.3 percent annually and (2) $4,310 in a money market account in which he is earning 5.25 percent annually. Jason wants to have $1 million when he retires. Starting next year, he plans to invest the same amount of money every year until he retires in a mutual fund in which he expects to earn 9.34 percent annually. How much will Jason have to invest every year to achieve his savings goal? (Round answer to 2 decimal places, e.g. 15.25.) Jason will have to save 4056.20 Click if you would like to Show Work for this question: Open Show Work VIDEO: SIMILAR PROBLEM SUBMIT ANSWER Question Attempts: 1 of 2 used SAVE FOR LATER

Answer 1

The value of the IRA account at the age 65 is calculated as below:-

Future value = Present value (1 + interest rate)"

Future value = $6960 x (1 +0.083) 35 = $ 113,397.9547

Value of the money market account at age 65 is calculated as :-

Future value = $4310 x (1 + 0.0525) 35 = $ 25,837.52608

To reach the goal of 1 million in 35 years, the remaining balance to be saved = $ 1,000,000 - $ 113,397.9547 - $ 25,837.52608

The remaining balance to be saved = $ 860764.5192

The amount Jason have to invest each year to reach his goal is calculated as:-

Al (1+r)n-1] Futuve value annuity =

A[(1 + 0.0934) 35 – 1] $ 860764.5192 = 1 0.0934

Solving for the value of A

Jason will have to save $ 3693.80