You Are Saving for Retirement

question 3

Multiple Choice

You are saving for retirement.To live comfortably,you decide that you will need $2.5 million dollars by the time you are 65.Today is your 30th birthday,and you decide that,starting today,on every birthday up to and including your 65th birthday you will deposit the same amount into your savings account.Assuming the interest rate is 5%,the amount that you must set aside each and every year on your birthday is closest to:

• A) $71,430
• B) $27,680
• C) $26,100
• D) $26,260

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Definitions:

Direct Method

A way of preparing the cash flow statement where actual cash flows from operating activities are listed directly.

Administrative Expenses

Costs related to the general administration of a business, such as salaries of office staff, rent, and utilities.

Cash Basis

A method in accounting where revenues and expenses are recorded only when cash is received or paid out, respectively.

Statement of Cash Flows

A financial statement that summarizes a company's cash inflows and outflows over a specific period.