Question

You want to retire exactly 35 years from today with $2,100,000 in your retirement account. If you think you can earn an interest rate of 10.67 percent compounded monthly, how much must you deposit each month to fund your retirement

Answer 1

Answer: $464.98

Step-by-step explanation:

For this question, we are going to use the annuity formula

Future value of an annuity:

= A [(1+r)^n-1) / r]

where

A = Annuity payment = unknown

r = rate per period

=10.67%/12

= 0.1067/12

= 0.00889

n = number of period:

= 35 × 12

= 420

Future value(FV) = $2,100,000

Future value = A [(1+r)^n-1) / r]

2100000 = A[(1+0.00889)^420 - 1)/0.00889

2100000 = A[1.00889)^420 - 1/0.00889

2100000 = A(41.15 - 1)/0.00889

2100000 = A(40.15)/0.00889

2,100,000 = A(4516.31)

A = 2,100,000/4516.31

A = $464.98

I must deposit $464.98 each month to fund the retirement