If you save $3600 per year with an 8% annual return starting at age 25, how much will you have by age 65?

If you save $3600 per year with an 8% annual return starting at age 25, how much will you have by age 65?

• A. $500,000
• B. $750,000
• C. $1,000,000
• D. $1,250,000

Answer: (C)

To determine how much you will have saved by age 65 after saving $3,600 per year with an 8% annual return, it's important to understand the effects of compound interest over time. You will be saving for 40 years (from age 25 to age 65). The formula for the future value of a series of annuity payments is: \[ FV = P \times \frac{(1 + r)^n - 1}{r} \] where: - \( FV \) = future value of the annuity - \( P \) = payment amount per period ($3,600 per year) - \( r \) = annual interest rate (8% or 0.08) - \( n \) = number of payment periods (40 years) Plugging in the values: 1. The annual payment \( P \) is $3,600. 2. The interest rate \( r \) is 0.08. 3. The number of years \( n \) is 40. Using the formula: \[ FV = 3600 \times \frac{(1 + 0.08)^{40} - 1}{0.08} \] Calculating \( (

To determine how much you will have saved by age 65 after saving $3,600 per year with an 8% annual return, it's important to understand the effects of compound interest over time.

You will be saving for 40 years (from age 25 to age 65). The formula for the future value of a series of annuity payments is:

[ FV = P \times \frac{(1 + r)^n - 1}{r} ]

where:

• ( FV ) = future value of the annuity

• ( P ) = payment amount per period ($3,600 per year)

• ( r ) = annual interest rate (8% or 0.08)

• ( n ) = number of payment periods (40 years)

Plugging in the values:

1. The annual payment ( P ) is $3,600.

2. The interest rate ( r ) is 0.08.

3. The number of years ( n ) is 40.

Using the formula:

[ FV = 3600 \times \frac{(1 + 0.08)^{40} - 1}{0.08} ]

Calculating ( (