Question

You want to have $1,000,000, 25 years from today. Assuming a 7% annual return (which will be compounded monthly), how much do you need to invest each month in order to have the $1,000,000 in 25 years?

Answer 1

Answer:

Monthly payments = $1,234.54

Explanation:

given data

Future value = $1,000,000

time = 25 year = 25 × 12 = 300 months

rate = 7 % annual = $\frac{0.07}{12}$ = 0.5833%  monthly

to find out

Monthly payments

solution

we will apply here future value formula that is express as

Future value = Monthly payments × $\frac{(1+rate)^{time} - 1}{rate}$  ..........1

put here value we get

Future value = Monthly payments × $\frac{(1+rate)^{time} - 1}{rate}$

1,000,000 = Monthly payments × $\frac{(1+0.005833)^{300} - 1}{0.005833}$

solve it we get

Monthly payments = $1,234.54