SOLUTION: Suppose that you’d like to retire in 40 years and you want to have a future value of $ 800000 in a savings account. Also suppose that your employer makes regular monthly payments
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Question 1198973: Suppose that you’d like to retire in 40 years and you want to have a future value of $ 800000 in a savings account. Also suppose that your employer makes regular monthly payments into your retirement account.
If you can expect an APR of 6% for your account, how much do you need your employer to deposit each month?
Employer Contribution =
The formulas we have been using assume that the interest rate is constant over the period in question. Over a period of 40 years, though, interest rates can vary widely. To see what difference the interest rate can make, let’s assume a constant APR of 2% for your retirement account. How much do you need your employer to deposit each month under this assumption?
Employer Contribution = Answer by Theo(13342) (Show Source):
You can put this solution on YOUR website! at 6% compounded monthly, your employer will need to contribute 401.71 at the end of each month for 40 years (480 months).
at 2% compounded monthly, your employer will need to contribute 1089.27 at the end of each month for 40 years (480 months).
40 years * 12 months per year = 480 months.
6% per year / 12 = .5% per month
2% per hear / 12 = .16666666666....% per month.
pay is negative because it is what you are paying.
future value is positive because it is what you are reciving.
