Question

Suppose you want to have $700,000 for retirement in 30 years. Your account earns 5% interest. How much would you need to deposit in the account each month?$_________________

Answer 1

The formula for a final amount A by depositing a regular amount R each month for n years with a interest rate r is given by:

`A=R\frac{\lbrack(1+(r)/(12))^{^(12n)}-1\rbrack}{(r)/(12)}`

For A = $700,000, r = 0.05, n = 30, we have:

`\begin{gathered} 700000=R\cdot(\lbrack(1+(0.05)/(12))^(12\cdot30)-1\rbrack)/((0.05)/(12)) \\ 700000=832.26R \\ R=\text{ \$841.08} \end{gathered}`