Question

Suppose you want to have $300,000 for retirement in 20 years. Your account earns 7% interest. Round your answers to the nearest cent. How much would you need to deposit in the account each month?

Answer 1

To have $300,000 for retirement in 20 years with a 7% interest rate, you would need to deposit approximately $941.34 each month.

Step-by-step explanation:

To calculate the monthly deposit needed, we can use the formula for the future value of an ordinary annuity:

FV = P * ((1+r)^n - 1) / r

Where FV is the desired future value, P is the monthly deposit, r is the interest rate divided by 12 (to get the monthly rate), and n is the number of periods (in this case, 20 years * 12 months = 240 months). Plugging in the values:

FV = 300,000, r = (7% / 12), n = 240

Solving for P, we find that you would need to deposit approximately $941.34 each month for 20 years to have $300,000 for retirement.