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Mike is currently 35 years old and plans on retiring at the age of 65. Ideally,...

Mike is currently 35 years old and plans on retiring at the age of 65. Ideally, Mike would like to retire with $1,000,000.00.

(Input all answers as positive values, no commas, with no symbols ex. no $ or %. Input all % answers as whole numbers without symbols ex. 10.03 for .1003. Input all final answers two decimal places out.)

How much would Mike have to deposit on a monthly basis to reach his goal if he can get a return of 10% compounded monthly?

Solutions

Expert Solution

Given that,

Mike is current 35 years old and he will retire at 65.

Amount needed at the time of retirement FV = $1000000

he will make monthly deposit of PMT for next t = 30 years at interest rate r = 10% compounded monthly

Compounding frequency n=12 months per year

So, monthly deposits can be calculated using FV formula of annuity:

PMT = FV*(r/n)/((1+r/n)^(t*n) - 1) = 1000000*(0.10/12)/((1+0.1/12)^(30*12) - 1) = $442.3824

So, he will need to deposit $442.38 monthly to reach his goal.

jeff jeffy answered 2 years ago
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