Sydney has a retirement plan that she invests $2,000 at the end of each year

Accounting Nov 02, 2020

Sydney has a retirement plan that she invests $2,000 at the end of each year. If her goal is to reach $21,273.26 when she retires in 8 years, what annual interest rate does Sydney have to earn?

12%

10%

Expert Solution

We have the equality:21273.26 = 2000FVIFA(r,8), where r = annualinterest rate.FVIFA(r,8) = 21273.26/2000 =10.6366From the annuity factor table, 10.6366corresponds to 8% for n = 8.Hence, the annual interest rate to be earned =8.00%

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