A civil engineer planning for her retirement places 10% of her salary each year into a high- technology stock fund. If her salary this year (end of year 1) is $160,000 and she expects her salary to increase by 3% each year, what will be the future worth of her retirement fund after 15 years provided it earns 7% per year?
What will be an ideal response?
First find P g and then convert to F in year 15
P g = (0.10)(160,000){1 – [(1 + 0.03)/(1 + 0.07)] 15 /(0.07 – 0.03)}
= 16,000(10.883) = $174,128.36
F = 174,128.36(F/P,7%,15)
= 174,128.36 (2.7590)
= $480,420.15
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