Monday, June 05, 2006

Some Math

How does one raise $1M in a short 11 years? Suppose I took a chunk of money and slapped it in a bank account that had an annual percentage rate of 4% compounding monthly. How much money would I need to start with? Here is a location that you can go to remember the equation that you need.

The answer is about $644,510.

I don't have that kind of money lying around...

Of course, to really build a nest egg, you should add some amount on a monthly basis. Let's say that I could afford to add $100 per month to the account above. Here's the equation that I need.

Now I've knock down my startup costs to: $633,850. Hmmm...

Ok. Ok. Let's say that I start with $500 and I can contribute $100 per month. Where would that get me in 11 years? $17,322.93. Yiii...

Obviously, I need a better interest rate. What interest rate should I find if I start with $500 and contribute $100 every month? 55.1%

Anyone up for a trip to Vegas?

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