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Problem 10: Becoming a Millionaire

Your buddy thinks that to become a millionaire is totally beyond his earning abilities. You, the financial wizard that you are, plan to show her otherwise. Assuming your friend is twenty-five years old and will retire at age sixty-five, and assuming a 6 percent interest rate, how much will she have to save each month to reach her goal of becoming a millionaire when she retires? How much each month if she earns 9 percent on her investments?

Clear your memory and set payments to monthly. FV = 1,000,000 N = (40*12) I = 6%, Solve for Payment (PMT)

PMT = $502.14. She will need to save $502 per month.

At 9 percent interest:

Clear your memory and set payments to monthly. FV = 1,000,000 N = (40*12) I = 9%, Solve for Payment

PMT = $213.62. She will need to save only $214 per month.

It’s not that hard to become a millionaire if you will invest a specific amount every month!


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