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Amanda, age 25, currently has $10,000 in her savings account
Amanda, age 25, currently has $10,000 in her savings account. She figures that she can save $20,000 per year at the start of each year (starting one year from now) indefinitely. She thinks that she can earn an after-tax return of 8% on her investments. She wants to have $1,000,000 at which point she will retire. How long will it take her to achieve her goal?
a) 19.6 years
b) 20.4 years
c) 24.7 years
d) 26.1 years
Expert Solution
We can calculate the number of years by using the following formula in excel:-
=nper(rate,-pmt,-pv,fv)
Here,
Nper = Number of years
Rate = 8%
Pmt = $20,000
PV = $10,000
FV = $1,000,000
Substituting the values in formula:
= nper(8%,-20000,-10000,1000000)
= 20.4 years
Hence, the correct option is b) 20.4 years
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