Determine the amount she should deposit the first year

Reference no: EM131925238

Question: A 25-year old engineer is opening an individual retirement account (RRSP) at a bank. Her goal is to accumulate $1 million in the account by the time she retires in 40 years. The bank manager estimates she may expect to receive 8% nominal annual interest, compounded quarterly, throughout the 40 years. The engineer believes her income will increase at a 7% annual rate during her career. She wishes to start with as low a deposit as possible to her RRSP now and increase it at a 7% rate each year. Assuming end of year deposits, determine the amount she should deposit the first year.

Reference no: EM131925238

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