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21 April, 03:07

Stacey would like to have $1 million available to her at retirement. Her investments have an average annual return of 11 %. If she makes contributions of $300 per month, will she reach her goal when she retires in 30 years?

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  1. 21 April, 03:15
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    She will not be able to reach her goal. She will make $841,355.92 and she is short by $158,644.08.

    Explanation:

    Monthly contribution = PMT = $300

    Number of years = 30 years

    Number of months = n = 30 x 12 = 360

    Rate of return = r = 11% yearly = 11%/12 = 0.917% = 0.00917

    Use following formula to calculate her total worth of investment after 30 years

    FV = PMT x [ (1 + r) ^n) - 1 ] / r

    FV = $300 x [ (1 + 0.00917) ^360) - 1 ] / 0.0917

    FV = $300 x [ (1 + 0.00917) ^360) - 1 ] / 0.0917

    FV = 841,355.92
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