Question

Problem 3 What is the monthly contribution ($/month) needed to your retirement account if you make contributions for 500 months and have $1,500,000 at the end assuming an interest rate of 5% per year, compounded monthly? How much ($) of the $1,500,000 will be from interest earned on your deposits?

Answer 1

i = 5% = 5/12 = 0.417%

n = 500 months

Amount at the end = 1500000

Monthly = 1500000*(A/F,0.417%,500)

= 1500000*0.000595

= 892.32

892.32*500 = 446160

Interest earned = 1500000-446160 = 1053840