Question

Jane plans to retire in 30 years and would like to have $500,000 in her account. If the interest on her account is 3.92% compounded monthly, how much should she put into her account every month?

a. $1,633.33 b. $1,388.89 c. $730.74 d. $653.33

Answer 1

$A=\frac{P[(1+\frac{r}{n})^{nt}-1]}{\frac{r}{n}}$

A$=$ $ 500,000

r$=$ $\frac{3.92}{1200}$ Compounded monthly

n$=$ 12

t$=$ 30 years

P$=?$

$\$500,000=\frac{P[(1+\frac{3.92}{1200})^{12×30}-1]}{\frac{3.92}{1200}}$

$\$500,000=684.24P$

$P=\$730.74$

$\therefore$ Jane should put $\$$ 730.74 into her account every month