Question

a) How much must be placed each month into a retirement account earning 11% compounded monthly if the value of the account is to reach $ 1,000,000 in 30 years?

Answer = $

b) If the account continues to earn 11% after retirement, how much per year will the account earn? Answer = $

Answer 1

a. Use PMT function in EXCEL to find the monthly deposits

=PMT(rate,nper,pv,fv,type)

rate=11%/12=0.9167%

nper=30*12=360

pv=0

fv=1000000

=PMT(0.9167%,360,0,1000000,0)=$356.57

Monthly deposits=$356.57

b. Use PMT function to find the annual withdrawls. Here number of years have not given,hence I am using 30 years.

=PMT(11%,30,0,1000000,0)=$5024.60