Jasmine has decided that she wants to build enough retirement wealth that, if invested at 6% per year, will provide her with $3,000 of monthly income for 30 years. To date, she has saved nothing but she still has 25 years until she retires. Jasmine believes that she can earn 9% on her investments until she retires. How much money does she need to contribute per month to reach her goal?
A) $446.32
B) $521.84
C) $667.13
D) $722.05

Question

Quizplus · Accepted Answer

To reach her goal, Jasmine needs to accumulate a nest egg of $3,000 x 12 x 30 = $1,080,000. Since she has 25 years until she retires, she needs to contribute $1,080,000 / (12 x 25) = $3,600 per month. However, since she can earn 9% on her investments until she retires, she only needs to contribute $3,600 / (1 + 0.09)^25 = $446.32 per month.

Jasmine Has Decided That She Wants to Build Enough Retirement