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Clara is setting up a retirement fund, and she plans on depositing $4,900 per year in an investment that will pay 8% annual interest. How long will it take her to reach her retirement goal of $61,189

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jepessoa

Answer:

9 years

Explanation:

assuming that Clara will make her deposits at year end (ordinary annuity), we can use the future value of an annuity formula:

FV = annual payment x annuity factor

  • FV = $61,189
  • annual payment = $4,900
  • annuity factor = ?

annuity factor = $61,189 / $4,900 = 12.48755

using a future value annuity table and looking at the 8% interest column, the factor for 9 periods is 12.488.

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