Question

How much money must you save every month for the next 45 years if you plan on retiring with $879 a month for what you expect is 11 years before you die. The intrest rate at the bank is 7% per year

Answer 1

Saving every month should be $ 21.29

Step-1:Present value of monthly cash flow
Present value		=	Monthly cash flow	*	Present value of annuity of 1
		=	$       879.00	*	91.87713
		=	$ 80,760.00
Working:
Present value of annuity of 1		=	(1-(1+i)^-n)/i		Where,
		=	(1-(1+0.005833)^-132)/0.005833		i	=	7%/12	=	0.005833
		=	91.877134		n	=	11*12	=	132
Step-2:Calculation of saving every month
Saving every month		=	Future Value of monthly saving	/	Future Value of annuity of 1
		=	$ 80,760.00	/	3792.595
		=	$         21.29
Working:
Future Value of annuity of 1		=	(((1+i)^n)-1)/i		Where,
		=	(((1+0.005833)^540)-1)/0.005833		i	=	7%/12	=	0.005833
		=	3792.59468		n	=	45*12	=	540