Suppose your personal financial goal is to retire with a million dollars in your savings account.How much must you deposit monthly in an account paying 5% a year (with interest being compounded monthly and your deposits occurring at the end of the month),to accumulate $1,000,000 by your 65^th birthday if you begin your deposits on your 22^nd birthday? (Note: Assume that you started with no savings in the account prior to your first deposit at age 22 and you do not make a deposit on your 65^th birthday) A)$552.13 B)$701.90 C)$21,282.95 D)$186,354.63

Question

Quizplus · Accepted Answer

To find the monthly deposit, use the future value of an annuity formula: FV = Pmt * [(1 + r)^nt - 1] / r, where FV is the future value ($1,000,000), Pmt is the monthly deposit, r is the monthly interest rate (0.05/12), n is the number of years (65-22=43), and t is the number of compounding periods per year (12). Solving for Pmt gives approximately $552.13.

Suppose Your Personal Financial Goal Is to Retire with a Million