Assume your goal in life is to retire with three million dollars. How much would you need to save at the end of each year if interest rates average 5% and you have a 10-year work life (the closest answer)

Annual savings = $238,512

Explanation:

Given dа ta:

Interest rate (r) = 5%

Number of years (n) = 10 years

Future value (Fv) = $3,000,000

Annual savings = ?

Calculating the future value of annuity factor using the formula;

Future value annuity factor (r%, n) = [ (1 + r) ¹⁰ - 1]/r

Substituting, we have

Future value annuity factor (5%, 10) = [ (1 + 0.05) ¹⁰ - 1]/0.05

= [ (1.05) ¹⁰ - 1]/0.05

= (1.6289 - 1) / 0.05

= 0.6289/0.05

= 12.578

But,

Future value = Annual savings x Future value annuity factor (r%, n)

Substituting, we have

$3,000,000 = Annual savings x 12.578

Annual savings = 3,000,000/12.578

= $238,512