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"Your goal is to retire at age 65 with $2.5 million in the bank. Imagine you are 25 years old. How much do you need to save every month between now an then if you can obtain the following returns on your investments: 4%, 6%, 8%, and 10%?"

I just need an equation, I can't find it anywhere and we're not given it. I have to use more variables so I can do it on my own (I'm not asking anyone to solve it for me), I just need an equation.

Carspn
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1 Answers1

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If you save $d$ dollars this month and the interest rate is $i$ per month, how much is it worth in $480$ months? If you save $d$ dollars next month and the interest rate is $i$ per month, how much is it worth in $479$ months? You have a geometric series to sum, one term for each month's deposit.

Ross Millikan
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  • But I don't know every month's deposit. That's what I have to figure out. I guess I have the sum from 0->480 of n + n*1.04? I have no idea what the equation is – Carspn Apr 18 '18 at 03:25
  • You presumably have compound interest, which is what generates the geometric series. When you sum the series you will get a result proportional to $d$. Divide the coefficient into $2.5$ million and you get $d$. Note that the returns you are given are presumably annual, not monthly returns. – Ross Millikan Apr 18 '18 at 03:33