Question

A 20-year-old student wants to save $1000 a year for her retirement. Every year she invests $1000 in a mutual fund with an expected annual return of 8%. How much money will she have when she is 65 years old? Assume that she invests right away and did not have any money in her saving account.

Part B

The same student, she wants to save $100 a month instead of $1000 a year. How much money will she have when she is 65 years old?

Part C

The same student, she wants to have $1,000,000 in her account when she is 65 years old. How much money she should invest per month? If her mom gives her an additional $1000 for investing at the beginning. Use this as a present value.

Answer 1

a.	Future Value of cash flow	=fv(rate,nper,pmt,pv,1)
		= $ 4,17,426.07
	Where,
	rate	=	8%
	nper	=	45
	pmt	=	$              -1,000
	pv	=	0
b.	Future Value of cash flow	=fv(rate,nper,pmt,pv,1)
		= $ 5,30,970.35
	Where,
	rate	=	8%/12	=	0.667%
	nper	=	45*12	=	540
	pmt			=	$      -100
	pv			=	0
c.	Monthly investment	=-pmt(rate,nper,pv,fv,1)
		= $ 181.52
	Where,
	rate	=	0.667%
	nper	=	540
	pv	=	$              -1,000
	fv	=	$       10,00,000