You are a financial advisor. You have a client who wants to save $2,000,000 for retirement...
- You are a financial advisor. You have a client who wants to save $2,000,000 for retirement at age 70. The client is currently 25.
- What monthly payment does the client need to make if the investment earns 6% interest per annum and the payment is made at the beginning of each month. Write the formula and the value in the space for the answer to this question.
- What is the payment if the client waits until age 40 to start saving, the investment earns 5% per annum and the payment is made at the end of each month? Write the formula and the value in the space for answer to this question.
Homework Answers
FV =2000000
Number of months =(70-25)*12 =420
a. Beginning monthly payment =FV/((1+r)*((1+r)^n-1)/r)
=2000000/((1+6%/12)*((1+6%/12)^420-1)/(6%/12))=1396.81
b. Number of months =(70-40)*12 =360
Monthly payment at end of month =FV/((1+r)^n-1)/r)
=2000000/(((1+5%/12)^360-1)/(5%/12))=2403.10
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