Mr. Wise is retiring in 25 years. He would like to accumulates $1,000,000 for hi

Question

Mr. Wise is retiring in 25 years. He would like to accumulates $1,000,000 for his retirement fund by then. He plans make equal monthly payments to achieve his goal. If the rate of return on the retirement fund is 12% (APR), what will his monthly payments be? Mr. Wise make payments (as per problem 8) for the first ten years and stops making payments after wares due personal problems. How much would he have accumulated at the time of retirement assuming that the accumulated amount keeps on earning interest at the stated rate on a monthly basis?

Explanation / Answer

let x be the monthly payment

future value of payments = 1000000

=>

x * [(1+12%/12)^300 -1]/12%/12 = 1000000

=>

x = 532.24 (ans)

future value of payments

= 532.24 * [(1+1%)^120 -1]/1% * (1+1%)^180

= 734100.76 (ans)

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