Monica has decided that she wants to build enough retirement wealth that, if inv

Question

Monica has decided that she wants to build enough retirement wealth that, if invested at 10 percent per year, will provide her with $5,200 of monthly income for 20 years. To date, she has saved nothing, but she still has 25 years until she retires.

How much money does she need to contribute per month to reach her goal? (Do not round intermediate calculations and round your final answer to 2 decimal places.)

How much money does she need to contribute per month to reach her goal? (Do not round intermediate calculations and round your final answer to 2 decimal places.)

Explanation / Answer

Monica has decided that she wants to build enough retirement wealth that, if invested at 10 percent per year, will provide her with $5,200 of monthly income for 20 years. To date, she has saved nothing, but she still has 25 years until she retires.

How much money does she need to contribute per month to reach her goal? (Do not round intermediate calculations and round your final answer to 2 decimal places.)

Amount Required at the time of retirement = monthly income required*(1-(1+r)^-n)/r

Amount Required at the time of retirement = 5200*(1-(1+10%/12)^-(20*12))/(10%/12)

Amount Required at the time of retirement = $ 538,848.02

Contribute per month = Amount Required at the time of retirement/(((1+r)^n-1)/r)

Contribute per month =  538848.02/(((1+10%/12)^(25*12) - 1)/(10%/12))

Contribute per month = $ 406.12

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