Question

Robin, who is self-employed, contributes $4500/year into a Keogh account. How much will he have in the account after 30 years if the account earns interest at the rate of 2.5%/year compounded yearly?

Answer 1

The amount that would be in the account after 30 years is $368,353

Explanation:

Here, we want to calculate the amount that will be present in the account after 30 years if the interest is compounded yearly

We proceed to use the formula below;

A = [P(1 + r)^t-1]/r

From the question;

P is the amount deposited yearly which is $4,500

r is the interest rate = 2.5% = 2.5/100 = 0.025

t is the number of years which is 30

Substituting these values into the equation, we have;

A = [4500(1 + 0.025)^30-1]/0.025

A = [4500(1.025)^29]/0.025

A = 368,353.3309607034

To the nearest whole dollars, this is;

$368,353