Question

Based on the number of years until your retirement, calculate the monthly savings required to build a portfolio of $500,000. Assume you are starting with zero savings, can earn 6 percent a year, and that you start saving on the first of each month. What if you could earn 9 percent a year but wanted to save $750,000 – what would you need to deposit into savings monthly?

Answer 1

Monthly Savings = $1,087.58

To calculate the monthly savings required to build a portfolio of $500,000 or $750,000 based on the number of years until retirement and interest rate, you can use the formula for the future value of an annuity.

Step-by-step explanation:

To calculate the monthly savings required to build a portfolio of $500,000 based on the number of years until your retirement, you can use the formula for the future value of an annuity. The formula is given by:

Monthly Savings = (Future Value * Interest Rate) / ((1 + Interest Rate)^(Number of Years * 12) - 1)

For this case, assuming a 6% annual interest rate, and let's say you have 30 years until retirement, the calculation would be:

Monthly Savings = (500,000 * 0.06) / ((1 + 0.06)^(30 * 12) - 1) = $543.63

If you could earn 9% annual interest and wanted to save $750,000, with the same 30 years until retirement, the calculation would be:

Monthly Savings = (750,000 * 0.09) / ((1 + 0.09)^(30 * 12) - 1) = $1,087.58