A recent college graduate begins a savings plan at age 27 by investing $600 at the end of each month in an account that earns an annual rate of 7.3%, compounded monthly. If this plan is followed for 10 years, how much should the monthly contributions be for the next 28 years in order to be able to withdraw $10,000 at the end of each month from the account for the next 25 years? Round your answer to the nearest cent.
A)$796.22
B)$516.96
C)$2,189.51
D)$214.45
E)$86.41

Question

A recent college graduate begins a savings plan at age 27 by investing $600 at the end of each month in an account that earns an annual rate of 7.3%, compounded monthly. If this plan is followed for 10 years, how much should the monthly contributions be for the next 28 years in order to be able to withdraw $10,000 at the end of each month from the account for the next 25 years? Round your answer to the nearest cent. ​
A)$796.22
B)$516.96
C)$2,189.51
D)$214.45
E)$86.41

Quizplus · Accepted Answer

The future value of the savings after 10 years is calculated using the future value of an annuity formula. Then, using the present value of an annuity formula, the required monthly contributions for the next 28 years are calculated to ensure the account can sustain $10,000 monthly withdrawals for 25 years.

A Recent College Graduate Begins a Savings Plan at Age