you believe you will spend $30,000 a year for 10 years once you retire in 20 years. if the interest rate is 5% per year, how much must you save each year until retirement to meet your retirement goal?

An interest rate provides information on how costly borrowing is or how profitable saving is. As a result, the amount you pay for borrowing money, stated as a percentage of the total loan amount, is the interest rate if you are a borrower.

Rate increases are typically a positive thing for saving money. With an increase in interest rates, certificates of deposit (CDs), money market accounts, and savings accounts all receive more interest. Savings enthusiasts so receive a higher return on the money they invest in bank accounts or CDs.

Calculation of amount needed in 20 years to spend over next 10 years

value of money 20 years from now = Annual Cash flow

x Present value of annuity of 1

= $ 30,000x 7.721735

= $2,31,652.05;

Working:-

Present value of annuity of 1$ = (1- (1+i)^-n) /;

Where,

= (1-(1+0.05)^-10)/0.05;

i;5%

= 7.721734929;

10 years Annual saving is given as Annual saving =

Future value of annual cash flows/ Future value of annuity of 1$

= $2,31,652.05/33.06595

=$7,005.76

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