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?

First compute how much money he will need at retirement, then compute the monthly contribution to reach that goal. (Do not round intermediate calculations and round your final answer to 2 decimal places.)

Answer 1

PVOrdinary Annuity = C*[(1-(1+i/100)^(-n))/(i/100)]

C = Cash flow per period

i = interest rate

n = number of payments

PV= 4700*((1-(1+ 5/1200)^(-25*12))/(5/1200))

PV = 803982.22

FVOrdinary Annuity = C*(((1 + i )^n -1)/i)

C = Cash flow per period

i = interest rate

n = number of payments

803982.2211= Cash Flow*(((1+ 5/1200)^(15*12)-1)/(5/1200))

Cash Flow = 3007.91