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% APR,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

The correct answer is A.To calculate the monthly deposit, we can use the formula for the future value of an annuity:FV = PMT * (((1 + r)^n - 1) / r)where:FV is the future value of the annuityPMT is the monthly depositr is the annual interest raten is the number of monthsIn this case, we have:FV = $1,000,000r = 12% / 12 = 1% per monthn = 30 years * 12 months/year = 360 monthsSubstituting these values into the formula, we get:$1,000,000 = PMT * (((1 + 0.01)^360 - 1) / 0.01)$1,000,000 = PMT * 286.13Therefore, Mr. Williams should put $286.13 into his pension fund each month in order to achieve his goal.

MrWilliams Expects to Retire in 30 Years and Would Like