Question

In: Accounting

8. I deposit $3,000 per month (at the end of each month) over the next 15...

8. I deposit $3,000 per month (at the end of each month) over the next 15 years. My investments earn 0.6 percent per month. I would like to have $1 million in 15 years. How much money should I deposit now?

Expert Solution

Step-1:Calculation of future value of monthly deposit of $ 3,000

Future Value of monthly deposit

=

Monthly deposit*Future Value of annuity of 1

=

$ 3,000

*

322.532

=

$ 9,67,596.05

Working:

Future Value of annuity of 1

=

(((1+i)^n)-1)/i

Where,

=

(((1+0.006)^180)-1)/0.006

i

0.60%

=

0.006

=

322.532

n

15*12

=

180

Step-2:Calculation of Balance amount needed in 15 Years

Total amount needed in 15 years

=

$ 10,00,000.00

Future Value of monthly deposit

=

$ 9,67,596.05

Balance amount needed further

$ 32,403.95

Step-3:Calculation of Amount to be deposited now

Present Value

=

Future Value *Present value of 1

=

$ 32,403.95

*

0.34069

=

$ 11,039.81

Working:

Present Value of 1

=

(1+0.006)^-180

=

0.34069

Thus,

Amount should be deposited now

$ 11,039.81

ekkarill92 answered 2 years ago

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