Question

Let’s say that you want to make $1 000 000 through regular investments. How much would you need to contribute each year if:

The interest rate was 2% and you invested for twenty years?
The interest rate was 4% and you invested for ten years?
The interest rate was 4% and you invested for twenty years?
The interest rate was 10% and you invested for twenty years?

Answer 1

Well you need an annuity formula that will determine the amount you need to invest each year:

Annual Amount = Total / (([(1+r)^(n+1)-1] / r)-1)

The total is 1,000,000
n is the time in years
***********************************************************
2% for 20 years
1,000,000 / [ ([((1.02)^21)-1] / .02 ) -1] =
1,000,000 / ([(1.5156663439 -1) / .02] -1) =
1,000,000 / [(.5156663439 / .02) -1]=
1,000,000 / (25.783317195 -1) =
1,000,000 / (24.783317195) =
40,349.72 each year
Okay, I solved the FIRST one. Now I think you can do the other 3. (Heck, you've got the formula now!!!)
And yes, it's just that "simple".