Investing for Retirement Ross has decided that he wants to build enough retirement wealth that,if invested at 6 percent per year,will provide him with $2,500 monthly income for 30 years.To date,he has saved nothing,but he still has 20 years until he retires.How much money does he need to contribute per month to reach his goal?
A)$895.95
B)$902.47
C)$1,947.88
D)$2,500.00

Question

Quizplus · Accepted Answer

To calculate how much Ross needs to contribute per month, we first need to calculate the total amount he needs to save:

$2,500 (monthly income) x 12 (months in a year) x 30 (number of years in retirement) = $900,000

Now we need to calculate how much Ross needs to save each month to reach that $900,000 goal in 20 years:

PV (present value) = $0 (since he hasn't saved anything yet)
FV (future value) = -$900,000 (negative because it's a future expense)
N (number of periods) = 20 years x 12 months per year = 240
I/Y (annual interest rate) = 6%/12 months = 0.5%
PMT (monthly contribution) = $902.47

Therefore, Ross needs to contribute $902.47 per month for the next 20 years at a 6% annual interest rate to reach his retirement goal. Answer B is the best choice.

Investing for Retirement Ross Has Decided That He Wants to Build