Question

At age 5, how much would you have to save per month to have $1 million in your account at age 65, if your investment rate was 10% per year? Assume no taxes and compounding on a monthly basis.

$213.30
$21.23
$274.60
can't be done with these assumptions.


After 20 years, 100 shares of stock originally purchased for $1000 was sold for $5,000. What was the yield on the investment? Choose the closest answer.
19%
5%
12.7%
8%

Answer 1

Let x be the average yield, expressed as a decimal.

(1+x)^20 = 5000/1000 = 5
log 5 = 20 log(1+x)
log (1+x) = 0.0349585
1+x = 1.0837
x = 8.4%
8% is the closest answer

Answer 2

R = Si/[(1+i)^n - 1] where R = the monthly deposit, i = the periodic decimal interest rate, and n = the number of deposits.
R = 1,000,000
i = 10/100(12) = .008333
n = 60(12) = 720

R = 1,000,000(.008333)/[1.008333^720)-1]
R = 8333.333/(393.428 - 1)
R = $21.24

Check:

S = [1.008333^720 - 1]/.008333 = $1,000,262.