Question

How much would a former ACE 240 student need to deposit monthly into an account that earns 8% annually if they want to accumulate $3,500,000 by the end of their 48 year working career

Answer 1

$1,086.60

Step-by-step explanation:

future value = $3,500,000, 8% annual interest rate and 48 years

first we must determine the effective monthly rate:

1.08 = (1 + i)¹²

1.006434 = 1 + i

i = 0.6434%

in order to determine the monthly payment, we can use the future value of an annuity formula:

FV = monthly payment x annuity factor

FV = $3,500,000

FV annuity factor, 0.6434%, 576 payments = 3,221.04593

monthly payment = $3,500,000 / 3,221.04593 = $1,086.60