Question

Gordon and Lisa estimate that they will need $1,875,000 in 40 years for their retirement fund. If they can earn
7% annually on their funds, how much do they need to save annually? (Round to ne nearest whole dollar.)
$7,238
O $7,987
O $8,103
O $9,392
O $9,875

Answer 1

Based on the amount that Gordon and Lisa will needed in 40 years, and the rate earned on their funds, they need to save $9,392.

How much should Gordon and Lisa save?

The amount is an annuity because it is constant. The $1,875,000 will be the future value of that annuity.

The formula is:
Future value of annuity = Amount x ( ( 1 + rate) ^ number of periods - 1) / rate

Solving gives:

1,875,000 = Amount x ( ( 1 + 7%)⁴⁰ - 1) / 7%

1,875,000 = Amount x 199.6351

Amount = 1,875,000 / 199.6351

= $9,392

Find out more on the future value of an annuity at https://brainly.com/question/27011316.