SOLUTION: Suppose you want to have $400,000 for retirement in 20 years. Your account earns 7% interest. a) How much would you need to deposit in the account each month? $ b) How mu

Algebra ->  Finance -> SOLUTION: Suppose you want to have $400,000 for retirement in 20 years. Your account earns 7% interest. a) How much would you need to deposit in the account each month? $ b) How mu      Log On


   

Question 1203059: Suppose you want to have $400,000 for retirement in 20 years. Your account earns 7% interest.
a) How much would you need to deposit in the account each month?
$
b) How much interest will you earn?
Found 2 solutions by Theo, ikleyn:
Answer by Theo(13342) About Me  (Show Source):
You can put this solution on YOUR website!
20 years * 12 months per year = 240 months.
7% interest rate per year / 12 = .5833333333% per month.
present value = 0.
future value = 400,000
payments are made at the end of each year.
use the financial calculator at https://arachnoid.com/finance/
here are the results.



you will need to deposit 767.86 into the account at the end of each month for 240 months.

your total payments are 240 * 3,101.20 = 744,288.
your

Answer by ikleyn(52781) About Me  (Show Source):
You can put this solution on YOUR website!
.
Suppose you want to have $400,000 for retirement in 20 years. Your account earns 7% interest.
a) How much would you need to deposit in the account each month?
b) How much interest will you earn?
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The problem's formulation in the post is presented monstrously flippantly:
period of compounding is not given and the term "compounding" itself
even is not mentioned.

When I see a problem presented so  highlight%28highlight%28inaccurately%29%29 / highlight%28highlight%28carelessly%29%29,  I prefer do not touch it.

For future generation of students, who will see this post, I only want to point
that the total payment calculation in the post by @Theo is incorrect.