Question

Suppose you want to have $400,000 for retirement in 25 years. Your account earns 6% interest. How much would you need to deposit in the account each month?

Answer 1

future value of annuity = A*[(1+r)^n-1]/r

here,

future value of annuity = 400,000

r = 6% per annum =>6%*1/12 =>0.50%

n= 25 years * 12

300 months.

A is to be found out

=>400,000 = A*[(1.005)^300-1]/0.005.

=>400,000=A *692.993962

=>400,000 / 692.993962 =A

=>$577.21.