Annual return on retirement

Question

A business owner plans to deposit his annual profits in an investment account earning a 9% annual return. If the owner starts with their first deposit today for $22,000 and expects to make the same profit for the next 7 years, how much will be saved for retirement at that point?

I got $220,626.42. My partner got $242, 626.42.

Who's right and why?

Answer 1

Hi Robin,

I am not getting either of those numbers.

I am using The Compound Interest Formula : A = P (1 + ^r_n) nt

A = Amount (which we are solving for)

P = principal = $22,000

r = rate = 0.09 (percent interest)

n = number = 1 (interest accrues ONCE a year)

t = time = 7 years

A = $22,000 (1+ 0.09)⁷

A = $40,216.90

I Hope this helps. Please let know if you have any questions, or need help doing the problem manually without a formula.

Good luck!

Amal