ellasmith98 ellasmith98

27-06-2024
Mathematics

Answered

Suppose you wish to retire at the age of 60
with $70,000
in savings. Determine your monthly payment into an IRA if the APR is 7.5%
compounded monthly and you begin making payments at 25
years old.

Answer :

sqdancefan sqdancefan

28-06-2024

Answer:

$34.47

Step-by-step explanation:

You want the monthly payment starting at age 25 that will result in an account value of $70,000 at age 60 if the account earns 7.5% interest compounded monthly.

Payment

The monthly payment P that will result in account value A after n years earning interest at annual rate r is given by ...

[tex]P=\dfrac{Ar}{12((1+r/12)^n-1)}\\\\\\P=\dfrac{70000\cdot0.075}{12(1.00625^{420}-1)}\approx34.4698[/tex]

Your monthly payment will be $34.47.

__

Additional comment

At 12 payments per year for 60-25 = 35 years, the number of payments is 12·35 = 420.

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