Question

Debbie is 22. She wants to invest part of her monthly salary in order to have $760,000 when she retires at 66. Suppose that she invests the money in a fund paying interest at an annual rate of 5.4%, compounded continuously. Assume a continuous money flow, then Debbie needs to invest $____per month.

Answer 1

$351.14

Step-by-step explanation:

Interest = 5.4% annual rate compounded continuously

Effective interest rate per month:

r = e^(5.4%*1/12) - 1

r = e^0.0045 - 1

r = 1.004510 - 1

r = 0.4510%

I = 0.4510%

FV = 760,000

PV = 0

n = 528 [(66 - 22)*12]

PMT = ?

Deposit per month = PMT(Rate, Period, PV, FV)

Deposit per month = PMT(0.4510%, 528, 0, 760000)

Deposit per month = $351.14

So, Debbie needs to invest $351.14 per month.