Question

Max is trying to save for retirement. He is going to deposit the same amount each month for 20 years into an account that pays 4.2% compounded interest. At the end of 20 years he would like to have at least $200,000, how much does he need to deposit each month (round to the nearest dollar)?

Answer 1

200000=X[((1+(0.042/12)^(12*20))-1)/(0.042/12)]
Solve for x
X=533.1414708
That's what I got in my calculator

Answer 2

Max needs to deposit $533.14 each month.

Explanation:

The formula use here is :

`FV=P(([1+R]^N-1)/R)`

FV = 200000

P = ?

R =
`4.2/12/100=0.0035`

N =
`20*12=240`

Putting these values in formula:

`200000=P(([1+0.0035]^(240)-1)/0.0035)`

=>
`200000=P(([1.0035]^(240)-1)/0.0035)`

=>
`200000=375.13P`

=> P = $533.14

Hence, Max needs to deposit $533.14 each month.