document.write( "Question 1122484: Suppose you want to have $800,000 for retirement in 30 years. Your account earns 8% interest.\r
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Algebra.Com's Answer #738615 by ikleyn(52787) $\"\"$ $\"About$

You can put this solution on YOUR website!
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\n" ); document.write( "Suppose you want to have $800,000 for retirement in 30 years. Your account earns 8% interest.\r
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\n" ); document.write( "\n" ); document.write( "To be consistent, the condition should be edited in this way:\r
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document.write( "    Suppose you want to have $800,000 for retirement in 30 years. Your account is compounded monthly and earns 8% annual interest.\r\n" );
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\n" ); document.write( "\n" ); document.write( "Then the solution is THIS :\r
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document.write( "It is a classic Ordinary Annuity saving plan. The general formula is \r\n" );
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document.write( "    FV = ,    \r\n" );
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document.write( "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; \r\n" );
document.write( "n is the number of deposits (= the number of years multiplied by 12, in this case).\r\n" );
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document.write( "From this formula, you get for the monthly payment \r\n" );
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document.write( "    P = .     (1)\r\n" );
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document.write( "Under the given conditions, FV = $800,000;  r = 0.08/12;  n = 30*12.  So, according to the formula (1), the monthly payment is\r\n" );
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document.write( "    P =  = $536.78.\r\n" );
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document.write( "Answer.  a)  How much would you need to deposit in the account each month ? - $536.78.\r\n" );
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document.write( "            Note that of projected $800,000 the total you deposit will be only  30*12 times $536.78, i.e. about 30*12*536.78 = 193241 dollars.                     \r\n" );
document.write( "            The rest is what the account will earn/accumulate in 30 years.\r\n" );
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document.write( "         b)  How much interest will you earn ?  - You will earn  = 314%  of interest.\r\n" );
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\n" ); document.write( "\n" ); document.write( "On Ordinary Annuity saving plans, see the lessons\r
\n" ); document.write( "\n" ); document.write( " - Ordinary Annuity saving plans and geometric progressions\r
\n" ); document.write( "\n" ); document.write( " - Solved problems on Ordinary Annuity saving plans\r
\n" ); document.write( "\n" ); document.write( "in this site.\r
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