Question

When you graduate college at the age of 20, you want to start saving up for retirement. If your investment pays a fixed APR of 9% and you want to have $2.5 million when you retire in 45 years, how much would you need to deposit, on a monthly basis, to reach this goal? Assume an ordinary annuity. a. $339.55 c. $337.62 b. $338.41 d. $336.21

Answer 1

Answer-

You need to deposit $337.62 each month, to reach this goal.

Solution-

We know that,

$\text{FV of annuity}=P[\frac{(1+r)^n-1}{r}]$

Where,

P = periodic payment

r = rate per period

n = number of period

Here,

$FV\ of\ annuity=2,500,000,\\\\P=?,\\\\r = 9\%\ annually=\frac{9}{12}\%\ monthly=\frac{9}{1200}\ monthly\\\\n=45\ years=45\times 12=540\ months$

Putting the values,

$\Rightarrow 2500000=P[\frac{(1+\frac{9}{1200})^{540}-1}{{\frac{9}{1200}}}]$

$\Rightarrow P=\frac{2500000}{[\frac{(1+\frac{9}{1200})^{540}-1}{{\frac{9}{1200}}}]}$

$\Rightarrow P=\frac{2500000}{\frac{56.5365-1}{0.0075}}$

$\Rightarrow P=\frac{2500000}{\frac{55.5365}{0.0075}}$

$\Rightarrow P=337.62$

Answer 2

Answer:

its c.337.62

Step-by-step explanation: