Question 1139382
Hi I have been trying and trying to find out this answer on my own and I just can't figure it out. Will someone help me solve this please? 

You plan to work for 40 years and then retire using a 25-year annuity. You want to arrange a retirement income of $4400 per month. You have access to an account that pays an APR of 7.2% compounded monthly.

What size nest egg do you need to achieve the desired monthly yield?
<pre>If I understand this problem, you're looking for the amount you need to have in order to receive $4,400 per month for 25 years, and compounded at 7.2% each year.
<b><u>If so, then IGNORE the other person's answer.</b></u>

This works the same way as purchasing a property for a certain price and then making monthly payments. Therefore, you use the formula for the
present value of an ordinary annuity, or: {{{highlight_green(matrix(1,3, PV[oa], "=", PMT * ((1-1/(1+i/m)^(mt))/(i/m))))}}}, where: {{{system(matrix(1,8, PV[oa], "=", Present, Value, of, an, ordinary, annuity), matrix(1,4, Periodic, payments, "=", PMT), matrix(1,4, Interest, rate, "=", i),  matrix(1,4, Compounding, period, "=", m), matrix(1,4, Time, period, "=",  t))}}}.
To realize your goal of receiving $4,400 per month for 25 years, @ an interest rate of 7.2% per annum, you need to acquire {{{highlight_green("$611,460.42")}}} by the time you're ready to retire.