Math Question

Question

Suppose you want to accumulate $70,000 to serve an 18-month mission with your spouse 40 years from now. Use the savings plan formula to see if the following investment will allow you to reach your financial goal. Assume that the number of payments periods and compoundings are the same.

You deposit $40 per month into an investment portfolio that averages an APR of 6%.
 
 

A)Final Balance:  ?????      (Round to the nearest dollar and do not use commas.)
 

B)Can you reach your goal  ?:  yes or not

Answer 1

Thank you for your question! You can do this computation using either a time value of money calculator to find the future value or the formula

FV = PMT * (((1 + rate)^n – 1) / rate)

Plugging in the values that we know here of PMT = $40, rate = 0.06/12 = 0.005, and n = 12*40 = 480, that becomes

FV = 40 * (((1 + 0.005)^480  –  1)/0.005)

FV = $79,659.63

That is the final balance for (a) and then since it exceeds the goal amount of $70,000 that means, that yes, you can reach your goal! :)