# A young executive deposits \$400 at the end of each month for 7 years and then increases the deposits. If the account earns 7.2%, compounded monthly, how much (to the nearest dollar) should each new deposit be in order to have a total of \$400,000 after 25 years

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539723

Created
April 30, 2011 10:18pm UTC

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0

3

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1. Split the problem in two parts, 25 years and 18 years.
The interest rate is known for the first part (7% p.a. or per month?) and compounded monthly. So the future value after 25 years is determined, say A.
Assuming A<400,000=target, subtract
remaining future value B=400,000-A and calculate deposit required for 18 remaining years at the given interest rate.

For the second part, the future value after (a further) 18 years is known,

539871

Created
May 1, 2011 1:48am UTC

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-1

2. Suppose a state lottery prize of \$2 million is to be paid in 20 payments of \$100,000 each at the end of each of the next 20 years. If money is worth 9%, compounded annually, what is the present value of the prize?

539911

Created
May 1, 2011 3:37am UTC

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0

3. Guru, please send a new post.
Piggybacking can confuse the original poster or readers. Thank you.