Question
Suppose you wish to retire at the age of 70 with
in savings. Determine your monthly payment into an IRA if the APR is
compounded monthly and you
begin making payments at 25 years old. Round your answer to the nearest cent, if necessary.
begin making payments at 25 years old. Round your answer to the nearest cent, if necessary.
Ask by Olson Medina. in the United States
Jan 24,2025
Upstudy AI Solution
Tutor-Verified Answer
Answer
The monthly payment needed is approximately $33.90.
Solution

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Mind Expander
To achieve your goal of having $80,000 by the age of 70, we need to calculate how much you should contribute monthly starting at age 25 with an APR of 5.5% compounded monthly.
Using the future value of an ordinary annuity formula:
Where:
-
= future value ($80,000) -
= monthly payment (what we want to find) -
= monthly interest rate (5.5% / 12 months = 0.00458333) -
= total number of payments (45 years × 12 months = 540)
Rearranging the formula for
:
Now plug in the values:
Calculating
:
Now substituting back into the payment formula:
So, the monthly payment you need to make is approximately $87.76.