1) How much should you deposit at the end of each month into an investment account that pays 9% compounded monthly to have $3 million when you retire in 40 years? 2) How much of the $3 million comes from interest?
Accepted Solution
A:
Answer:(1). $627.77 (2). $2,698,670.4Step-by-step explanation:Using the formula below; P= A(r/n) / (1+r/n)^nt - 1 --------(1).A= annuity= 3,000,000 United States of America dollarP=?, t= 40 years, n= 12, , r= 9%= 9/100= 0.09Therefore, substitution into equation (1) above; P= 3,000,000 (0.09/12)/ (1+0.09/12)^12×40 -1 = 22,500/(1.0075)^479=22,500/ 35.84= 627.77.My monthly payment will be $627.77. Principle payment will now be; Principle= n×t× monthly payment= 12× 40× 627.77= $ 301,329.6.(b). Interest= Annuity - principle$(3,000,000 - 301,329.6= $2,698,670.4