Problema Solution
Marion Gropius wants to save $190,000 for her retirement over a period of 20 years. With a rate of return of 6%, what would be her annual contribution to reach this goal if she begins with no initial investment?
Answer provided by our tutors
Let
R = the periodic payment;
S = $190,000.00 is the future value;
i = 0.06 or 6% is the interest rate per period;
n = 20 is the number of periods.
R = (S*i)/((1+ i)^n - 1)
R = (190000*0.06)/((1 + 0.06)^20 - 1)
R = $5,165.07
her annual contribution would be $5,165.07.