Question

Suppose you want to have $800,000 for retirement in 35 years. Your account earns 10% interest. How much would you need to deposit in the account each month?

Answer 1

Future Value of an Ordinary Annuity
= C*[(1+i)^n-1]/i
Where,
C= Cash Flow per period
i = interest rate per period =10%/12 =0.833333%
n=number of period =35*12 =420
$800000= $C[ (1+0.008333333)^420 -1] /0.008333333
$800000= $C[ (1.008333333)^420 -1] /0.008333333
800000= $C[ (32.6386 -1] /0.008333333]
C = $210.71
Correct Answer = $210.71