Felix is keen to apply his finance knowledge to his real-life investment goals. He is currently 19 years of age and wishes to retire from full-time work at the age of 60 with $5 000 000 in his portfolio. He started contributing monthly to a NASDAQ index fund.
a) How much will Felix need to contribute at the end of each month in order to receive $5 000 000 at the age of 60 at a compound return of 8.50% p.a.?
Show formula, variables, calculation and a concluding statement in your response.
An annuity refers to a series of equal cash flows made at regular intervals. The future value of an ordinary annuity formula allows us to determine the accumulated value of these monthly contributions over time, taking into account the interest earned on the investments. It considers the time value of money and the compounding effect of investment returns over time.
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