Question

BONUS 1 (5 points): Your uncle tells you that you will end up with $1,000,000 at retirement if you start now and invest $2,500 at the end of the year annually for 10 years and then never invest another penny and simply let the investment grow for the next 35 years until you retire. If you can earn a 9.75% annualized return is your uncle right? How much will you have in 45 years? $_

Answer 1

We use the formula:
A=P(1+r/100)^n
where
A=future value
P=present value
r=rate of interest
n=time period.

A=2500*(1.0975)^44+2500*(1.0975)^43+2500*(1.0975)^42+2500*(1.0975)^41+2500*(1.0975)^40+2500*(1.0975)^39+2500*(1.0975)^38+2500*(1.0975)^37+2500*(1.0975)^36+2500*(1.0975)^35

=$1021676.64(Approx)

Hence uncle was right.