ames is starting to take his financial future seriously after studying finance at university. He is currently 25 years of age and wishes to retire from full-time work at the age of 55 with $2 000 000 in savings. b) How much will James need to contribute at the start of each month in order to receive $2 000 000 in 30 years’ time at a compound interest rate of 7.25% p.a.? Show formula, variables, calculation and a concluding statement in your response.
ames is starting to take his financial future seriously after studying finance at university. He is currently 25 years of age and wishes to retire from full-time work at the age of 55 with $2 000 000 in savings. b) How much will James need to contribute at the start of each month in order to receive $2 000 000 in 30 years’ time at a compound interest rate of 7.25% p.a.? Show formula, variables, calculation and a concluding statement in your response.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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ames is starting to take his financial future seriously after studying finance at university. He is currently 25 years of age and wishes to retire from full-time work at the age of 55 with $2 000 000 in savings.
b) How much will James need to contribute at the start of each month in order to receive $2 000 000 in 30 years’ time at a
Show formula, variables, calculation and a concluding statement in your response.
Expert Solution
Step 1 - Introduction
To calculate the monthly amount we will use the below formula
FV = P*(1+r)*[(1+r)n-1]/r
Where
FV - Future value i.e. $2,000,000
P - Monthly contribution
r - Monthly interest rate i.e. 7.25%/12 = 0.604166666666667%
n - Number of the monthly periods i.e. 30*12 = 360
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