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You want to have $1,000,000, 25 years from today. Assuming a 7% annual return (which will be compounded monthly), how much do you need to invest each month in order to have the $1,000,000 in 25 years?

Respuesta :

Answer:

Monthly payments = $1,234.54

Explanation:

given data

Future value = $1,000,000

time = 25 year = 25 × 12 = 300 months

rate = 7 % annual = [tex]\frac{0.07}{12}[/tex] = 0.5833%  monthly

to find out

Monthly payments

solution

we will apply here future value formula that is express as

Future value = Monthly payments × [tex]\frac{(1+rate)^{time} - 1}{rate}[/tex]  ..........1

put here value we get

Future value = Monthly payments × [tex]\frac{(1+rate)^{time} - 1}{rate}[/tex]

1,000,000 = Monthly payments × [tex]\frac{(1+0.005833)^{300} - 1}{0.005833}[/tex]

solve it we get

Monthly payments = $1,234.54

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