Ross has decided that he wants to build enough retirement wealth that, if invest
ID: 2796608 • Letter: R
Question
Ross has decided that he wants to build enough retirement wealth that, if invested at 5 percent per year, will provide him with $4,700 of monthly income for 25 years. To date, he has saved nothing, but he still has 15 years until he retires.
How much money does he need to contribute per month to reach his goal? (Do not round intermediate calculations. Round your final answer to 2 decimal places.)
Ross has decided that he wants to build enough retirement wealth that, if invested at 5 percent per year, will provide him with $4,700 of monthly income for 25 years. To date, he has saved nothing, but he still has 15 years until he retires.
Explanation / Answer
Amount of money Ross requires at retirement can be calculated using PV function
N = 25 x 12 = 300, PMT = 4,700, FV = 0, I/Y = 5%/4 = 1.25% => Compute PV = $366,949.38
Monthly Contribution can be calculated using PMT function
N = 15 x 12 = 180, PV = 0, FV = 366,949.38, I/Y = 5%/4 => Compute PMT = $548.91
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