Sharon wants to retire in 25 years time, and so decides to start a new retiremen

Question

Sharon wants to retire in 25 years time, and so decides to start a new retirement savings account. She wants to accumulate 750000 dollars by the time she retires. Initially, Sharon deposits 1000 dollars into the account. She will make further deposits at the end of each month. The account will earn interest at annual rate 5 percent, compounded monthly. How much will she have to deposit into the account each month in order to reach this target after 25 years? (Give your answer, in dollars, correct to the nearest cent.)

Explanation / Answer

solution-

FV of initial deposit = 1000(1+0.05/12)^360 = $4467.74

balance FV needed = 750000 - 4467.74 = $745532.26

PMT((1 +0.05/12)^360 - 1)/(0.05/12) = 832.258635*PMT

PMT = 745532.26/832.258635 = $895.79

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