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You want to have $2 million 40 years from now. How much must you deposit each year (starting at the end of year 1 and ending at the end of year 40) if you are certain you can earn 8% annual interest with annual compounding?

Respuesta :

TomShelby

Answer:

We should make monthly deposits of 572.90 dollars to achieve the 2,000,000 dollars in 40 years

Explanation:

We have to calculate the monthly annuity to achieve 2,000,000 in 40 years (which is 40 x 12 = 480 months)

[tex]FV \div \frac{(1+r)^{time} -1}{rate} = C\\[/tex]

FV 2,000,000

time 480

rate 0.006666667 ( 0.08 / 12 month per year)

[tex]2000000 \div \frac{(1+0.0066667)^{480} -1}{0.006666667} = C\\[/tex]

C  $ 572.900

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