Question

Suppose you want to have $800,000 for retirement in 20 years. Your account earns 9% interest. How much would you need to deposit in the account each month?

Answer 1

Amount to be deposited each month = $1190.5

Step-by-step explanation

Simple Interest is given as

Simple Interest = (PRT/100)

where

P = Principal = Amount that is deposited that increases at simple interest = x dollars

R = Rate = 9%

T = Time = 20 years

Total amount at the end of 20 years = Principal + Simple Interest

800,000 = x + (x × 9 × 20/100)

800,000 = x + 1.8x

800,000 = 2.8x

2.8x = 800,000

Divide both sides by 2.8

(2.8x/2.8) = (800,000/2.8)

x = $285,714.3

So, if this amount is to be piled up over 20 years at amonthly rate,

There are 20 × 12 = 240 months in 20 years.

Amount to be deposited each month = (285,714.3/240) = $1190.5

Hope this Helps!!!