Question

Justin Barber would like to retire in 25 years, and he estimates that he will need $1,000,000 at this time. He plans to deposit $1,000 a month in a retirement account that pays 8% annual interest.

1. 1. If Justin makes his first $1,000 deposit next month, how much money will he have by the end of 25 years? Will he have the $1,000,000 that he needs?
2. 2. How much will Justin have to deposit every month if he wants to have exactly $1 million 25 years from now?

Answer 1

a.	Future value	=-fv(rate,nper,pmt,pv)
		= $ 9,51,026.39
	Where,
	rate	=	8%/12	=	0.006666667
	nper	=	25*12	=	300
	pmt			=	$                1,000
	pv			=	0
	So,
at the end of 25 years, Justin Barber would have	$    9,51,026.39
b.	Monthly deposit	=-pmt(rate,nper,pv,fv)
		= $ 2,628.74
	Where,
	rate	=	8%/12	=	0.006666667
	nper	=	25*12	=	300
	pv			=	0
	fv			=	$ 25,00,000.00