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In: Finance

You plan on working for the next 35 years before retiring and you would like to...

You plan on working for the next 35 years before retiring and you would like to accumulate $2 million when you stop working. If you start today, how much will you deposit each month to reach $2 million in retirement? Assume you will average a 7% annual rate of return in deposits will be made at the end of each month.

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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 =7%/12 =0.583333%
n=number of period =12*35 =420
$2000000= C[ (1+0.0058333333)^420 -1] /0.0058333333
2000000= C[ (1.0058333333)^420 -1] /0.0058333333
2000000= C[ (11.5062 -1] /0.0058333333]
C =$1110.46
Monthly deposit = $1110.46

jeff jeffy answered 3 years ago
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