Question

Suppose you want to have $800,000 for retirement in 25 years. Your account earns 9% interest....

Suppose you want to have $800,000 for retirement in 25 years. Your account earns 9% interest.

a) How much would you need to deposit in the account each month?

$

b) How much interest will you earn?

$

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Homework Answers

Answer #1

Ans:- (a) In this part, we need to find the monthly deposit. we will use the PMT function of excel.

Rate = 9%/12, Nper = 25*12 = 300, PV = 0, FV = $800,000

Therefore the monthly deposit will be $713.57.

(b) Interest earned will be given by Amount earned - Amount Invested = $800,000 - $713.57 * 300 = $585,928.73

Note:- Amount Invested is calculated by Monthly deposit * Nper.

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