Question

In: Finance

Suppose that Michael wants to have $250,000 saved by the time he has reached age 30....

  • Suppose that Michael wants to have $250,000 saved by the time he has reached age 30. He is currently 21 and has no money in invested. Michael thinks that he can earn an annual return of 7% on his investments compounded monthly.
    • How much does he need to invest each month to reach his goal?
    • If his investments were compounded annually and not monthly, how much short was he on reaching his goal?

Solutions

Expert Solution

1)

Hence, Investment in each month is $1,668.24

2)

Amount saved will be $239,785.92

Hence, Amount will be short by $10,214.08 ($250,000-$239,785.92)


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