Question

Sophia wishes to retire at age 65

with $1,600,000
in her retirement account. When she turns 28
, she decides to begin depositing money into an account with an APR of 9%
compounded monthly. What is the monthly deposit that Sophia must make in order to reach her goal? Round your answer to the nearest cent, if necessary

Answer 1

To determine the monthly deposit that Sophia must make in order to reach her retirement goal, we can use the formula for the future value of an annuity:

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

where:

FV = future value of the annuity (which is Sophia's retirement goal of $1,600,000)

P = monthly deposit

r = annual interest rate (which is 9%)

n = number of times interest is compounded per year (which is 12 for monthly compounding)

t = number of years until retirement (which is 65 - 28 = 37)

Substituting the given values, we get:

1600000 = P * ((1 + 0.09/12)^(12*37) - 1) / (0.09/12)

Simplifying and solving for P, we get:

P = 1600000 * (0.09/12) / ((1 + 0.09/12)^(12*37) - 1)

P ≈ $524.79

Therefore, Sophia must make a monthly deposit of approximately $524.79 in order to reach her retirement goal of $1,600,000.

Explanation: