Suppose a student wants to be a millionaire in 40 years. If she has an account that pays 8% interest compounded monthly

Question

Question: how much must she deposit each month in order to achieve her goal of having $1,000,000? What is the present value of this annuity?

 

Please help me explain the process in step by step manner, if possible, what is the reason or why the particular formula is used or if there may be other formula that can be used to solve the same question. Thank you very much for other questionsyou have answered.

Answer 1

P( 1 + 0.08/12) ^ (40*12) = 1,000,000

 

  P ( 1.007) ^ 480 = 1,000,000

 

  log P + 480 Log(1.007)= 6

 

   Lop P  + 480( 0.003) = 6

 

  log P = 6- 1.44= 4.56

 

   p = 10 ^ 4.56= 36,307.81   / $ dollar amount has to be invested each month for 40 years.