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?

a) $

b) 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?

c)$

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

d)$

Answer 1

• GIVEN FUTURE VALUE =$600,000

  Rate=5.9% Annualy, = 5.9/12=0.491667% per month
  Number of periods = 40*12=480
  Hence payment required each month is
  sing excel for calculations, formula: =PMT(0.00491667,480,0,600000)

• Hence monthly payment shall be $309.55

  For $309.55 payment, amount invested shall be 309.55*480=$148585

  Hence interest earned shall be =600,000-148,585=$451415

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For achieving goal in 20 years:

Future Value =600,000
Rate=5.9% Annualy, = 5.9/12=0.491667% per month
number of periods = 40*20=240
Hence payment required each month:
sing excel for calculations, formula: =PMT(0.00491667,240,0,600000)

Hence monthly payment shall be $1314.04

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Future Value =To be calculated
Rate=5.9% Annualy, = 5.9/12=0.491667% per month
Amount deposited per month= $1314.04
Number of periods = 10*12=120
USING EXCEL FORMULA: =FV(0.00491667,120,1314.04,0) =$214,179.38
After 10 years we get value of savings = $214,179.38

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