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ludmilkaskok
28 days ago
6

You want to save sufficient funds to generate an annual cash flow of $55,000 a year for 25 years as retirement income. You curre

ntly have no retirement savings but plan to save an equal amount each year for the next 38 years until your retirement. How much do you need to save each year if you can earn 7.5 percent on your savings?Select one:a. $3,333.33b. $2,640.85c. $3,146.32d. $2,889.04e. $3,406.16
Business
1 answer:
arsen [2.9K]28 days ago
5 0

Answer:

The total required amount is $7,056.46

Explanation:

Given the following details:

You aim to accumulate enough savings to produce an annual cash flow of $55,000 for 25 years during retirement. How much should you save each year, assuming a return of 7.5 percent on your savings?

Final value = 55,000 * 25 = 1,375,000

Using the formula: FV = {A*[(1+i)^n-1]}/i

A represents the annual contribution.

To isolate A:

A = (FV*i)/{[(1+i)^n]-1}

A = (1,375,000*0.075)/[(1.075^38)-1]= $7,056.46

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