Question

How much should you invest each month in order to have $600,000 if your rate of return is 5.9% compounded monthly and you want to achieve your goal in 40 years?

$

How much interest will you earn?

$

How much should you invest each month in order to have $600,000 if you want to achieve your goal in 20 years?

$

If you deposit the amount you need to achieve your goal in 20 years, how much will your savings be worth after 10 years?

Answer 1

a) The future value after 40 years here is given to be 600,000. As the rate of return here is 5.9% p.a compounded monthly, let the amount of money invested each month be K. Then, we have here:

This is a geometric distribution here, whose sum is computed here as:

therefore $308.04 is the monthly investment required here.

b) The interest earned is computed here as:

Therefore $452,141.74 is the amount of interest here.

c) Using the same way as part a), the amount of investment here is computed as:

therefore the monthly investment required here is: $1,307.61

d) The future value of the investment in 10 years is computed here as:

therefore the value of investment in 10 years here is given as:

= $214,179.19