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How much will you need to save per month to have $200,000 after 12 years, if your account earns 5% interest per year, compounded monthly?

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 14EB: How much must be invested now to receive $50,000 for 8 years if the first $50,000 is received in one...

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Question

How much will you need to save per month to have $200,000 after 12 years, if your account earns 5% interest per year, compounded monthly?

Expert Solution

Step 1

The formula used as follows:

$\begin{array}{rcl} F u t u r e v a l u e o f a n n u i t y & = & P a y m e n t \times (\frac{{(1 + r)}^{n} - 1}{r}) \end{array}$

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