Question

You are saving for retirement. To live​ comfortably, you decide you will need to save $ 1million by the time you are 65.Today is your 29 th​birthday, and you​ decide, starting today and continuing on every birthday up to and including your 65 th​birthday, that you will put the same amount into a savings account. If the interest rate is 8 %​,how much must you set aside each year to make sure that you will have $ 1million in the account on your 65 th​birthday?

Answer 1

Answer:

Monthly pay= 5344.67

Explanation:

Giving the following information:

To live​ comfortably, you decide you will need to save $ 1million by the time you are 65.

Today is your 29th ​birthday, and you​ decide to put the same amount into a savings account. If the interest rate is 8%​.

How much must you set aside each year?

n= 36

i= 0.08

FV= 1,000,000

We need to use the following formula:

FV= {A*[(1+i)^n-1]}/i

We need to isolate A (monthly pay):

A= (FV*i)/[(1+i)^n-1]

A= (1000000*0.08)/(1.08^36-1)

A= 80000/14.96817184

A= 5344.67