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Mr. Hopper expects to retire in 30 years, and he wishes to accumulate $1,000,000 in his retirement fund by that time. If the interest rate is 12% per year, how much should Mr. Hopper put into his retirement fund at the end of each year in order to achieve this goal

Answer :

Answer:

Annual deposit = $4100

Explanation:

Annual deposit = $4100

Number of years for retirement = 30 years

Future value of money = $1000000

Interest rate = 12%

Now use the below formula to find the annuity amount.

Annual deposit = Future value (A/F, r, n)

Annual deposit = 1000000 (A/F, 12%, 30)

Annual deposit = 1000000(0.0041)

Annual deposit = $4100

The amount Mr Hopper should put in his retirement fund each year is $4143.66.

In order to determine the amount of money Mr. Hopper should deposit each year, this formula would be used:

Yearly payment = future value / annuity factor

Annuity factor = {[(1+r)^n] - 1} / r

Where:  

R = interest rate  

N = number of years  

Annuity factor = [(1.12)^30 - 1] / 0.12 = 241.332684

Yearly payment = $1,000,000 / 241.332684 = $4143.66

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