Question

When he was 40 Keefer began investing $150 per month in various securities for his retirement savings. His investments averaged a 4.5% annual rate of return until he retired at age 70. What was the value of Keefer's retirement savings when he retired? Assume monthly compounding of interest.

Answer 1

At retirement, Keefer will have saved for 30 (that is, 70-40) years.
Monthly saving, P = $150, Annual rate of return, R = 4.5% = 0.045.

Therefore, future value (FV) at the time of retirement will be;

FV = P*[1+(R/12)^12*30]/(R/12)
Substituting all the parameters;
FV = 150*[1+(1+0.045/12)^360]/(0.045/12) = $113.907.92