Question

Cathrine just turned 31. After consulting a financial planner and laying out her retirement goals, she calculates that she will need a balance of $480,000in her retirement account to supplement Social Security she plans to start collecting when she turns 64. She plans to Strat saving innmediately and to invest her funds in a market index fund that is expected to have an annual return of 4.7% ov er the 33 years she will be saving money for retirement. How much does Cathrine need to save and invest every MONTH in order to reacher goal of having $480,000 by the time she is age 64?

$529.22

$554.09

$491.94

$507.84

Answer 1

Solution Whereas, A=Monthly deposit r=Monthly rate of Interest=4.7%/12=0.3917% n=No of period compounding is done=33 years x 12 Months =396 Computation of monthly deposit required for desired amount $480,00 EA x ((1+r)^n-ıl r $480,00 Ax[(1+0.3917%)^396-1] 0.3917% $480,000 X 0.3917% = Ax [3.6711] A=$507.8 Hence the monthly deposit required for desired amount is $507.8 Conclusion Hence the correct option is $507.8