Today is Derek’s 25th birthday. Derek has been advised that he needs to have $2,907,389.00 in his retirement account the day he turns 65. He estimates his retirement account will pay 5.00% interest. Assume he chooses not to deposit anything today. Rather he chooses to make annual deposits into the retirement account starting on his 30.00th birthday and ending on his 65th birthday. How much must those deposits be?
Suppose you deposit $2,199.00 into an account today. In 7.00 years the account is worth $4,000.00. The account earned ____% per year.
1.
Rate = 5%
Nper = 36
PV = 0
FV = $2,907,389
Amount of deposits can be calculated by using the following
excel formula:
=PMT(rate,nper,pv,fv)
=PMT(5%,36,0,-2907389)
= $30,337.03
2.
Nper = 7
PMT = 0
PV = 2199
FV = 4000
Rate can be calculated by using the following excel
formula:
=RATE(nper,pmt,pv,fv)
=RATE(7,0,-2199,4000)
= 8.92%
The account earned 8.92% per year.
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