Suppose you want to have $800,000 for retirement in 25 years. Your account earns 5% interest....

Suppose you want to have $800,000 for retirement in 25 years. Your account earns 5% interest. a) How much would you need to deposit in the account each month? $ 1,343.39 Correct b) How much interest will you earn? $

Solutions

Expert Solution

Future Value of an Ordinary Annuity
= C*[(1+i)^n-1]/i

Where,
C= Cash Flow per period
i = interest rate per period
n=number of period

800000= C[ (1+0.004166667)^300 -1] /0.004166667

800000= C[ (1.004166667)^300 -1] /0.004166667

800000= C[ (3.4813 -1] /0.004166667]
=$1343.39



Total payment = $1343.38691225
403016.07
=$403016.07

Interest earned = $800000-403016.08
=$396983.92

jeff jeffy answered 2 years ago

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