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  • Allison is 30 years old and plans to retire at age with $1,200,000 in her retirement account. what amount would she have to set aside now in an investment paying 6% annual interest if the compounding is done daily

Allison is 30 years old and plans to retire at age with 1,200,000 in her retirement account. what amount would she have to set aside now in an investment paying 6% annual interest if the compounding is done daily

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Answer:   Let the principal amount she sets a side in an investment be $ P 

                She retires at an age of 65 , that is , in 35 years from the date of investment .

            Period of investment = 35 years 

        rate of interest =6% per annum =( 6/365)% = 0.016438 % per day 

         r = 0.016438% 

 

n= number of time the interest is compound 

As compounding is done each day ,  \ n=(365 imes 35)=12775

Maturity Amount = 1,200,000$ =P 

⇒    = \ P(1+ 0.016438/100)^12775=(1.00016438)^12775 

P= $1200000/8.1644=14697$

 

 

Posted by

Deependra Verma

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