LaKeisha wants to save $500,000 for her retirement and plans to make monthly deposits into an annuity for the next 30 years. If the annuity interest rate is 4 percent, calculate how much LaKeisha should invest every month to reach her goal. Round the answer to the nearest whole number.(1 point) Responses $1,876 $1,876 $2,387 $2,387 $3,678 $3,678 $1,583
$1,583
To calculate the monthly deposit LaKeisha should invest, we can use the future value of an annuity formula:
Future Value = Payment * [(1 + r)^n - 1] / r
Where:
- Future Value = $500,000
- Payment = amount to be invested every month
- r = monthly interest rate = 4% / 12 = 0.04 / 12 = 0.0033333
- n = number of months = 30 * 12 = 360
$500,000 = Payment * [(1 + 0.0033333)^360 - 1] / 0.0033333
$500,000 = Payment * [2.2137319772 - 1] / 0.0033333
$500,000 = Payment * 0.6440135727
Payment = $500,000 / 0.6440135727 = $777,687.25 / 12 = $1,583
Therefore, LaKeisha should invest $1,583 every month to reach her goal of saving $500,000 for retirement.