Questions: You want to retire at age 65. You decide to make a deposit to yourself at the end of each year into an account paying 8%, compounded annually. Assuming you are now 25 and can spare 1,100 per year, how much will you have when you retire at age 65? (Give your answer to the nearest cent.)

You want to retire at age 65. You decide to make a deposit to yourself at the end of each year into an account paying 8%, compounded annually. Assuming you are now 25 and can spare 1,100 per year, how much will you have when you retire at age 65? (Give your answer to the nearest cent.)

Transcript text: You want to retire at age 65 . You decide to make a deposit to yourself at the end of each year into an account paying $8 \%$, compounded annually. Assuming you are now 25 and can spare $\$ 1,100$ per year, how much will you have when you retire at age 65? (Give your answer to the nearest cent.) \$ $\square$

Solution

Solution Steps

To solve this problem, we need to calculate the future value of an annuity. The future value of an annuity formula is used to determine how much money will accumulate over time when regular deposits are made into an account with a fixed interest rate. Here, the interest rate is 8%, the annual deposit is $1,100, and the time period is 40 years (from age 25 to 65).

Step 1: Identify the Variables

We have the following variables: