Question

You want to retire exactly 30 years from today with $1,980,000 in your retirement account. If you think you can earn an interest rate of 10.19 percent compounded monthly, how much must you deposit each month to fund your retirement?

Answer 1

Answer:

$841

Explanation:

Let the amount of deposit you need to fund each month is a

n= 30 years = 30 x 12 = 360 months

The amount of money you desire to have in 30 years (FV) = $1,980,000

i/r = 10.19%/year = 0.849%/month

Based on these given information, you can either choose to:

1) Solve the following equation:

a x 1.00849^360 + a x 1.00849 ^359 + a x 1.00849^358 + ... + a x 1.00849^1 + a = $1,980,000

2) Input given information into excel/financial calculator:

n = 360

FV = $1,980,000

i/r = 0.849

PV = 0

Find PMT (a). PMT (a) = $841