Carolyn wants to retire in 30 years time, and so decides to start a new retirement savings account. She wants?
Question by : Carolyn wants to retire in 30 years time, and so decides to start a new retirement savings account. She wants?
to accumulate 400000 dollars by the time she retires.
Initially, Carolyn deposits 1000 dollars into the account. She will make further deposits at the end of each month.
The account will earn interest at annual rate 8 percent, compounded monthly.
How much will she have to deposit into the account each month in order to reach this target after 30 years? (Give your answer, in dollars, correct to the nearest cent.)
monthly deposit:
Best answer:
Answer by Harry
FV = PV(1+i/n)^(n*t) + A[(1+i/n)^(n*t) - 1]/(i/n)
0000 = 00(1+0.08/12)^(12*30) + A[(1+0.08/12)^(12*30) - 1]/(0.08/12)
A = 1.05
Know better? Leave your own answer in the comments!
r = 8/1200 = 1/150
n = 12*30 = 360 for monthly deposits
but 361 for initial deposit
account for the initial deposit and
reduce the problem to that of an ordinary annuity
$400,000 – $1000(1+1/150)^361 = $388,991.365
388,991.365 = P( (1+1/150)^360 – 1)/(1/150)
P = $261.00
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