Question
Upon retirement (40 years from now) you want to receive "4,000" (amount of money you choose in Part a) each month for a period of 28 years. This money resides in an account that pays 5.8% interest. How much money must be in the account to fulfill your goal?
Answers
Reiny
In order to use our standard compound interest formulas, the payment period must be the same as the compounding period of the interest rate, so I will assume you meant 5.8% per annum compounded monthly.
i = .058/12 = .00483333...
present value of what is needed now .... P
Pick 40 years from now as the focal date
P(1.00483333...)^480 = 4000(1 - 1.00483333..^-336)/.00483333...
(I stored .0048333.. in my calculator's memory, thus keeping the best accuracy possible )
P(10.11896447) = 663,822.3742
P = $65,601.81
i = .058/12 = .00483333...
present value of what is needed now .... P
Pick 40 years from now as the focal date
P(1.00483333...)^480 = 4000(1 - 1.00483333..^-336)/.00483333...
(I stored .0048333.. in my calculator's memory, thus keeping the best accuracy possible )
P(10.11896447) = 663,822.3742
P = $65,601.81