3. You want to save enough money to retire as a millionaire. (Age now is 30)...

3. You want to save enough money to retire as a millionaire. (Age now is 30)

a. If you could earn 10% with common stocks, how much would you have to set aside per year to have $1,000,000 when you are 65?

b. If you were going to make deposit monthly, how much would you have to set aside per month to have $1,000,000 when you are 65?

c. What type of a problem is this?

Solutions

Expert Solution

a. If you could earn 10% with common stocks, how much would you have to set aside per year to have $1,000,000 when you are 65?

n = 65 - 30 = 35

We should set aside $3,689.7051198926 per year

b) If you were going to make deposit monthly, how much would you have to set aside per month to have $1,000,000 when you are 65?

n = (65 - 30) * 12 = 420 monthly payments

r = 0.10/12 = 0.008333333333 monthly rate

We must set aside $263.3909228272 every month

c) This is a type of annuity problem

jeff jeffy answered 1 year ago

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