Answer:
To determine how much you would need to deposit in the account each month, we can use the formula for the future value of an annuity:
FV = P * [(1 + r)^n - 1] / r
Where:
FV is the future value or the amount you want to have at retirement ($400,000 in this case)
P is the monthly deposit amount we want to find
r is the monthly interest rate (4% divided by 12 to get the monthly rate, which is 0.04/12 = 0.00333)
n is the number of periods or months (25 years multiplied by 12 months, which is 25 * 12 = 300)
Plugging the values into the formula, we have:
400,000 = P * [(1 + 0.00333)^300 - 1] / 0.00333
To solve for P, we can rearrange the equation:
P = 400,000 * 0.00333 / [(1 + 0.00333)^300 - 1]
P ≈ 584.65
Therefore, you would need to deposit approximately $584.65 each month into the account to have $400,000 for retirement in 25 years, assuming an interest rate of 4%.
Explanation:
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