Mr. Williams expects to retire in 30 years and would like to accumulate $1 million in his pension fund. If the annual interest rate is 12 percent, how much should Mr. Williams put into his pension fund each month in order to achieve his goal? (Assume that Mr. Williams will deposit the same amount each month into his pension fund, using monthly compounding.)
A)$286.13
B)$771.60
C)$345.30
D)$437.13

Question

Quizplus · Accepted Answer

To find the monthly deposit, we use the future value of an annuity formula: FV = Pmt * [(1 + r)^nt - 1] / r, where FV is the future value ($1,000,000), r is the monthly interest rate (0.12/12), n is the number of years (30), and t is the number of compounding periods per year (12). Solving for Pmt gives approximately $286.13.

Mr Williams Expects to Retire in 30 Years and Would