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You accepted a new job with starting salary of $52,000 per year. The salary is expected to increase 4% each year. Now it is time to make a retirement plan for the next 39 years you expect to work. Your retirement fund has an annual interest rate of 5%, and You plan to deposit 10% of your annual salary into the account. (Hint: Be sure to move all values to the same point in time for equivalency.)

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Answer:

FV= $1,607,145.61

Explanation:

Giving the following information:

Annual deposit= $5,200

Growth rate= 4%

Interest rate= 5%

Number of years= 39 years

First, we will include the growing rate in the interest rate:

Interest rate= 0.05 + 0.04= 0.09

Now, we can calculate the final value using the following formula:

FV= {A*[(1+i)^n-1]}/i

A= annual deposit

FV= {5,200*[(1.09^39)-1]/0.09]

FV= $1,607,145.61

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