Case Study 1
Anita is 30 years old and wants to retire at 60 with a retirement corpus of ₹2 crores. She has not saved anything yet but can start investing ₹20,000 per month. She expects an annual return of 9% on her investments.
Solution:
1. Future Value of Monthly Investments:
Using the future value formula:
- 𝐹𝑉=𝑃×[(1+𝑟)^𝑛−1/𝑟]
Where:
- P is the monthly investment (₹20,000)
- 𝑟 is the monthly interest rate (9% annual rate / 12 months = 0.0075)
- 𝑛 is the number of investments (30 years × 12 months = 360)
FV = ₹20,000× [(1+0.0075)^360−1]/ 0.0075
FV = ₹20,000×149.03=₹29,80,600
Anita will have approximately ₹2.98 crore, which exceeds her goal.
2. If Anita needs to invest more:
If the target was not met, she could use the same formula to solve for P (monthly investment) to find the required monthly contribution.