Siri plans to retire in 18 years and would like to receive $10 000.00 per month for twenty years starting at the end of the first month after her retirement. Calculate the amount he must invest now every month (at the end of the month) if interest is 4.9% compounded monthly.
A) $1 528 015
B) $4420.74
C) $633 665
D) $10 660
E) $11 755

Question

Quizplus · Accepted Answer

To calculate the amount Siri must invest each month, we can use the formula for the present value of an annuity:

PMT x [(1 - (1 + r)^(-n))/r]

where PMT is the monthly payment, r is the monthly interest rate, and n is the total number of months.

We know that PMT = $10,000, r = 4.9%/12 = 0.00408, n = 20 years x 12 months/year - 1 month = 239 months.

Plugging in the values, we get:

$10,000 x [(1 - (1 + 0.00408)^(-239))/0.00408] = $4420.74

Therefore, Siri should invest $4420.74 every month, at the end of the month.

Siri Plans to Retire in 18 Years and Would Like