When you graduate college at the age of 20, you want to start saving up for retirement. If your investment pays a fixed APR of 8.5% and you want to have $500,000 when you retire in 45 years, how much would you need to deposit, at the beginning of each month, to reach this goal?

The monthly interest rate is 0.085 ÷ 12, and 45 years gives 45 × 12 = 540 deposits. Because deposits are made at the beginning of each month, use the future value formula for an annuity due: $500,000 = deposit × [((1 + 0.085/12)^540 − 1) ÷ (0.085/12)] × (1 + 0.085/12). Solving gives a monthly deposit of about $79.53, choice a.

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