A 25-year-old decides that her goal is to retire at age 50 with at least $2,000,000 in savings. The
Company investment annuity offers 7.3% annual returns, compounded monthly. What amount will
She need to invest each month?

Question

Quizplus · Accepted Answer

To find the monthly investment required to reach a future value of $2,000,000 with a 7.3% annual interest rate compounded monthly, we use the future value of a series formula: $FV = P \times \frac{(1 + r)^n - 1}{r}$, where $FV$ is the future value, $P$ is the monthly payment, $r$ is the monthly interest rate (annual rate divided by 12), and $n$ is the total number of payments (months). Rearranging the formula to solve for $P$, and substituting $FV = 2,000,000$, $r = 0.073/12$, and $n = 25 \times 12$, we find that the monthly investment required is approximately $2,353.96.

A 25-Year-Old Decides That Her Goal Is to Retire at Age