Question

Meg's pension plan is an annuity with a guaranteed return of 7% interest per year (compounded monthly). She would like to retire with a pension of $20000 per month for 20 years. If she works 28 years before retiring, how much money must she and her employer deposit per month? (Round your answer to the nearest cent.)

Answer 1

Assuming that her rate of interest is the same on her deposits ....
i = .07/12 = .005833333...

The "amount" she has at the end of 28 years becomes the "present value" for the next 20 years

let her monthly deposit be x
x [1.00583333)^336 - 1]/.00583333 = 20000 [ 1 - 1.00853333^-240 ]/.0085333
multiply each side by that denominator and its gone

x(6.0590146) = 20000(.75239795)
x = 2483.57

are you sure it was 20,000 per mont and not 2,000?
If it was 2,000 then x = 248.36

Answer 2

yes 20000

Answer 3

thank you I get it now THANKS!