document.write( "Question 1160115: Suppose you want to have $300,000 for retirement in 20 years. Your account earns 5% interest. How much would you need to deposit in the account each month? \n" ); document.write( "

Algebra.Com's Answer #783292 by ikleyn(52784) $\"\"$ $\"About$

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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 \r\n" );
document.write( "presented as a decimal; 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 = $300,000;  r = 0.05/12;  n = 20*12 = 240.  \r\n" );
document.write( "So, according to the formula (1), you get for the monthly payment \r\n" );
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document.write( "    P =  = $729.87.\r\n" );
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document.write( "Answer.  The necessary monthly deposit value is $729.87.\r\n" );
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document.write( "Note that of projected $300,000, the total of your deposits will be only  20*12 times $729.87, \r\n" );
document.write( "i.e.  20*12*729.87 = 175169 dollars. The rest is what the account will earn/accumulate in 20 years.\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
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\n" ); document.write( "\n" ); document.write( "The lessons contain EVERYTHING you need to know about this subject, in clear and compact form.\r
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\n" ); document.write( "\n" ); document.write( "When you learn from these lessons, you will be able to do similar calculations in semi-automatic mode.\r
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