Problema Solution
If you can earn 4 percent, how much will you have to save each year if you want to retire in 35 years with $ 1 million
Answer provided by our tutors
we will use the Sinking Fund Payment formula
R = S*i/((1 + i)^n - 1)
where
R = the periodic payment;
S = the future value;
i = interest rate per period;
n = the number of periods.
in our problem we have
S = $1,000,000
n = 35 periods
i = 0.04
R = 1000000*0.04/((1 + 0.04)^35 - 1)
R = $13,577.32
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i will have to save $13,577.32 every year.