.
The formulation is not precisely correct, so I edited it:
Jada wants to invest in a mutual fund for her retirement. If the account is 17% annual interest compounded monthly,
and she wants to retire in 35 years, how much money must she invest at the end of each month to have 5,000,000 when she retire?
Solution
It is a classic Ordinary Annuity saving plan. The general formula is
FV = ,
where FV is the future value of the account; P is the monthly payment (deposit); r is the monthly percentage yield presented as a decimal;
n is the number of deposits (= the number of years multiplied by 12, in this case).
From this formula, you get for for the monthly payment
P = . (1)
Under the given conditions, FV = 5000000; r = 0.17/12; n = 35*12. So, according to the formula (1), you get for the monthly payment
P = = 192.98 (rounded with 2 decimal places to the nearest greater value).
Answer. The necessary monthly deposit value is 192.98.
---------
On Ordinary Annuity saving plans, see the lessons
- Ordinary Annuity saving plans and geometric progressions
- Solved problems on Ordinary Annuity saving plans
in this site.
The lessons contain EVERYTHING you need to know about this subject, in clear and compact form.
When you learn from these lessons, you will be able to do similar calculations in semi-automatic mode.