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Question 1061850: How much should you invest each month in order to have $800,000 if your rate of return is 5.3% compounded monthly and you want to achieve your goal in 40 years?
How much interest will you earn?
How much should you invest each month in order to have $800,000 if you want to achieve your goal in 20 years?
If you deposit the amount you need to achieve your goal in 20 years, how much will your savings be worth after 10 years?
Answer by Theo(13342)   (Show Source):
You can put this solution on YOUR website! rate of return is 5.3% compounded monthly.
number of years = 40.
future value = 800,000
interest rate per month is 5.3% / 12 = .4416666....%
number of time periods if 40 * 12 = 480
payment required at the end of each month is equal to 484.5267545
your total payments are 480 * 484.5267545 = 232,572.8422
total interest earned would be 800,000 minus 232,572.8422 = 567,427.1578
if you want to achieve your goal in 20 year, you would have to invest 1879.790424 at the end of each month for 240 months.
you will have 800,000 after 20 years.
if you deposit that money for an additional 10 years at the same rate of interest per year compounded annually, then you will have 1,357,560.674.
you can use an online calculator to get the results similar to this.
they might not be right on because of possible rounding errors, but they'll be close.
that online calculator can be found at http://arachnoid.com/finance/
here's pictures of my solution using this calculator.
the first picture shows the payment required at the end of each month for 40 years at 5.3% interest per year compounded monthly.
your future value is set at 800,000.
your number of time periods is set at 40 * 12 = 480 months.
your interest rate percent per time period is set at 5.3/12 = .4416666666.... rounded as required by the calculator.
your monthly payments are shown as 484.53.
the second pictures shows the payment required at the end of each month for 20 years at 5.5% interest per year compounded monthly.
your future value is set at 800,000.
your number of time periods is set at 20 * 12 = 240 months.
your interest rate percent per time period is set at 5.3/12 = .4416666666.... rounded as required by the calculator.
your monthly payments are shown as 1879.79.
the third picture shows the future value of 800,000 invested at 5.3% interest per year compounded monthly for 10 years.
your present value is set at 800,000.
your monthly payments are set at 0.
your number of time periods is set at 10 * 12 = 120.
your interest rate percent per time period is set at 5.3/12 = .4416666666.... rounded as required by the calculator.
your future value is 1,357,561.21
if you need a tutorial on financial formulas, one can be found here:
https://www.algebra.com/algebra/homework/Finance/THEO-2016-04-29.lesson#notes
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