This site has a calculator that figures out this problem. Just plug in the numbers.
http://www.moneychimp.com/calculator/compound_interest_calculator.htm
A young engineer wishes to become a millionaire by the time he is 60yrs old. He believes that by careful investment he can obtain a 15% rate of return. he plans to add a uniform sum of money to his investment program each year, beginning on his 20th birthday and continuing through his 59th birthday. How much money must the engineer set aside in this project each year?
3 answers
Thank you for the site, I can see it is very useful. I have been able to obtain 4293.33,
but I want to learn how to solve it manually, as during test time I will not be able to use the handy site.
:)
but I want to learn how to solve it manually, as during test time I will not be able to use the handy site.
:)
Let P be his annual investment.
You want $1M = P*(1.15)^40 + P*(1.10^39 + ... P(1.15)
= 40P* sum((1.15)^i)
So, with your hand calculator, enter 1.15 -store, *1.15 Mem+ *1.15 Mem+ ...
Take it from here.
You want $1M = P*(1.15)^40 + P*(1.10^39 + ... P(1.15)
= 40P* sum((1.15)^i)
So, with your hand calculator, enter 1.15 -store, *1.15 Mem+ *1.15 Mem+ ...
Take it from here.
1 answer