Use the TVM Solver to calculate the amount you should make in monthly payments into an investment account if you want to have $1,000,000 in 60 years. The account pays 3.9% interest compunded monthly and you will make an intial investment of $25,000

Question

Use the TVM Solver to calculate the amount you should make in monthly payments into an investment account if you want to have $1,000,000 in 60 years. The account pays 3.9% interest compunded monthly and you will make an intial investment of $25,000

Answer 1

To use the TVM Solver to calculate the monthly payments required to accumulate $1,000,000 in 60 years with a 3.9% interest rate compounded monthly and an initial investment of $25,000, follow these steps:

Step 1: Identify the variables:
- Present Value (PV): -$25,000 (negative because it represents an initial investment)
- Future Value (FV): $1,000,000
- Interest Rate (I/Y): 3.9% per year
- Time Period (N): 60 years
- Payments (PMT): ? (what we are trying to find)

Step 2: Access the TVM Solver:
- If you have a financial calculator, locate the "TVM" or "Time Value of Money" function and open it.
- If you are using a spreadsheet software (e.g., Microsoft Excel or Google Sheets), you can use the "PMT" function.

Step 3: Enter the known values:
- Enter -$25,000 as the initial investment (PV).
- Enter $1,000,000 as the future value (FV).
- Enter 3.9% divided by 12 (0.325%) as the interest rate per period (I/Y). Since the account is compounded monthly, divide the annual interest rate by 12 to get the monthly interest rate.
- Enter 60 as the number of periods (N).

Step 4: Calculate the monthly payments:
- For financial calculators: Press the "Compute" or "Solve" button, and the calculator will determine the monthly payments required to reach $1,000,000 in 60 years.
- For spreadsheet software:
- Use the PMT function, which has the syntax: PMT(rate, nper, pv, [fv], [type]).
- Enter the following formula: "=PMT(0.00325,60,-25000,1000000)" into a cell. This will calculate the monthly payment.

Step 5: Interpret the result:
- The result will be the amount you need to contribute monthly to accumulate $1,000,000 in 60 years. The value will be negative because it represents an outgoing payment.

Remember, these calculations are based on the assumptions you've provided (interest rate, compounding frequency, etc.).

Use the TVM Solver to calculate the amount you should make in monthly payments into an investment account if you want to have $1,000,000 in 60 years. The account pays 3.9% interest compunded monthly and you will make an intial investment of $25,000

To use the TVM Solver to calculate the monthly payments required to accumulate $1,000,000 in 60 years with a 3.9% interest rate compounded monthly and an initial investment of $25,000, follow these steps:

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