To check your answer,
523.23*4*25=52323 which is only about 6% of the final amount, which seems too low.
So looking at your working:
Future value = (payment)[((1+i)^n-1)/i]
is basically correct, if we assume
i=interest per period.
rate 4.2% is annual interest (by normal convention), so the interest per period is
i=4.2%/4=1.05%=0.0105
If you repeat the same calculations with the corrected value of i, then you should find the quarterly payment to be over four thousand dollars.
Parts (b) and (c) would be correct if you had the correct answer for (a)
Post your answers again if you wish to confirm.
You would like to have $750,000 when you retire in 25 years. How much should you invest each quarter if you can earn a rate of 4.2% compounded quarterly?
future value = (payment)[((1+i)^n-1)/i]
750000 = P[(1.042^(4*25)-1)/0.042]
750000 = P[1433.4]
payment = $523.23
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a) How much should you deposit each quarter?:: 523.2307
b) How much total money will you put into the account?:: $52,323.07
c) How much total interest will you earn?:: 750,000-52323 = 697,676.93
1 answer
1 answer