Question

Charlie is 40 years old and has $450,000 in his savings and he wants to use some of the money to buy a house. His goal is to have $1,500,000 in his account by the time he reaches 65. How much should he leave in his account if he earns a 12% APR compounded monthly?

Answer #1

Required amount will be amount so that future value of which become target amount of $ 1,500,000 by the time he reaches 65. | ||||||||||||||

Amount to be deposited now | = | Present value of $ 1,500,000 | Where, | |||||||||||

= | A*(1+i)^-n | A | Future value | = | $ 15,00,000 | |||||||||

= | 1500000*(1+0.01)^-300 | i | Interest rate | 12%/12 | = | 0.01 | ||||||||

= | $ 75,801.73 | n | number of period | (65-40)*12 | = | 300 | ||||||||

So,
he should leave in his account |
$ 75,801.73 |
|||||||||||||

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