Problema Solution
a 30 year old worker plans to retire at age 65. he believes that 500,000 is needed to retire comfortably. how much should be deposited now at 3.5% compounded monthly to meet the 500,000 retirement goal.
Answer provided by our tutors
P = ? the principal (the money that he should deposit)
r = 0.035 or 3.5% annual interest rate
t = 65 - 30 = 35 years
m = 12 compounding periods per year
i = r/m = 0.035/12 interest rate per period
n = t*m = 35*12 = 420 total number of compounding periods
A = $500,000 the future value
A = P(1 + i)^n
P = A/((1 + i)^n)
P = 500000/((1 + 0.035/12)^420)
P = $147,140.968
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