How much do you have to save each month if you can earn an annual return of 10.9
ID: 2749772 • Letter: H
Question
How much do you have to save each month if you can earn an annual return of 10.9 percent? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
How much do you have to save each month if you wait 10 years before you begin your deposits? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
How much do you have to save each month if you wait 20 years before you begin your deposits? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
You want to be a millionaire when you retire in 40 years.
Explanation / Answer
Future value of annuity = P×[(1+r)^n-1]÷r
r is interest rate per period
P is payment per period
n is number of payments
$1,000,000 = P×[(1+(10.9%÷12))^(40×12)-1]÷(10.9%÷12)
Monthly deposit, P = $119.95
$1,000,000 = P×[(1+(10.9%÷12))^(30×12)-1]÷(10.9%÷12)
Monthly deposit, P = $364.41
$1,000,000 = P×[(1+(10.9%÷12))^(20×12)-1]÷(10.9%÷12)
Monthly deposit, P = $1,170.58
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