CFA® Level 1: Retirement Planning

Retirement Planning: Monthly Deposit Calculation

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Question

If you want $1,000,000 when you retire in 25 years, how much must you deposit each month, beginning one month from today, if your funds will earn 9% per year, compounded monthly?

Answers

Explanations

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A. B. C. D. E.

Explanation

Note that since the deposits are made monthly, there are 300 of them (25 x 12 = 300). On the BAII Plus, press 300 N, 9 divide 12 = I/Y, 0 PV, 1000000 FV, CPT

PMT. On the HP12C, press 300 n, 9 ENTER 12 divide i, 0 PV, 1000000 FV, PMT. Note that the answer will be displayed as a negative number. Make sure the

BAII Plus has the value of P/Y set to 1.

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