algebra
3. Suppose a student wants to be a millionaire in 40 years. If she has an account that pays 8% interest compounded monthly, how much must she deposit each month in order to achieve her goal of having $1,000,000? What is the present value of this annuity?
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The present value of the annuity can be calculated using the formula: PV = PMT [((1+i)^n -1 )/ (i(1+i)^n)] Where: PV = Present Value PMT = monthly payment i = interest rate per period n = total number of periods Therefore, in this case the present value can be calculated as follows: PV = PMT [((1+0.08/12)^480 -1) / (0.08/12(1+0.08/12)^480) ] PV = PMT (4.0069952) Therefore, the monthly payment required to achieve her goal of having $1,000,000 in 40 years is $2,080.50 and the present value of this annuity is $8,332.66.
