When you finally retire, you want to be able to draw from an account an annual salary of $100,000 for 20 years. Approximately how much should be in your account that has an APR of 5% when you retire, such that you can draw an annual salary of $100,000? Assume an ordinary annuity.
a.
$62,000
c.
$1,310,000
b.
$1,250,000
d.
$3,000,000

Question

When you finally retire, you want to be able to draw from an account an annual salary of $100,000 for 20 years. Approximately how much should be in your account that has an APR of 5% when you retire, such that you can draw an annual salary of $100,000? Assume an ordinary annuity.
a.
$62,000
c.
$1,310,000
b.
$1,250,000
d.
$3,000,000

anonymous · Answer

B is the correct answer.  You can simply use a Present value calculating of all future cash flows (20x100,000) at 5% to find this value.