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Homework answers / question archive / Bob, proprietor of Bob's Burgers, would like to retire in 20 years

Bob, proprietor of Bob's Burgers, would like to retire in 20 years

Finance

Bob, proprietor of Bob's Burgers, would like to retire in 20 years. He plans to deposit $6500 at the end of each year for the next 20 years into an account expected to earn 7.5% compounded annually. How much will Bob have in his retirement account in 20 years immediately after making his last deposit? Round your answer to the nearest dollar.

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Answer:

use the formula:
A=P(1+r/100)^n
where
A=future value
P=present value
r=rate of interest
n=time period.

Hence

A=6500(1.075)^19+6500(1.075)^18+6500(1.075)^17+....+6500(1.075)^1+$6500

=$6500[(1.075)^19+(1.075)^18+(1.075)^17+....+(1.075)^1+1]

=$6500*43.30468(Approx)

=$281,480.43(Approx)

=$281480(Approx)

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