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# Periodic Compound Interest

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How much should you deposit at the end of each month into an investment account that pays 8.5 %compounded monthly to have$3 million when you retire in 40 ​years? How much of the$ 3 million comes from​ interest?

Oct 14, 2019

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Since your are given the Financial Formulas to calculate all your posted questions, you should be able to use them and arrive at the right answer. I, however, will use an online financial calculator to give you the answers. You can use the calculator here: https://arachnoid.com/finance/

The monthly deposit will be = $742.82$3,000,0000 - [$742.82 x 480] =$2,643,446.40 - This is the interest portion of the investment.

Oct 14, 2019
edited by Guest  Oct 14, 2019
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thank you

skye25  Oct 14, 2019
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You should use the formula. This will help to give you an “intuitive” understanding of how the TVM works. Save the online financial calculators for checking your work. If you just use financial calculators or software to solve these, it will alter your DNA, and you’ll become a Blarney Banker.

$$\text {Here is the formula ...}\\ \text { }\\ \dfrac{FV*\left(\dfrac{r}{n}\right)} {\left(1+\dfrac{r}{n}\right)^{nt} -1} =D\\ \text{ }\\ \small \dfrac{3000000*\left(\dfrac{0.085}{12}\right)} {\left(1+\dfrac{0.085}{12}\right)^{(12*40)} -1} = 742.82\\ \text{ }\\ \small \text {A monthly deposit of 742.82 dollars for 40 years and the accrued compounded interest will have a future value of 3,000,000 dollars. }\\$$

Paste this into the forum’s calculator:

f=3000000;r=0.085;n=12;t=40; f*(r/n)/ ((1+r/n)^(n*t) -1)

GA

Oct 14, 2019
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thank you

skye25  Oct 14, 2019