Question

You are to make monthly deposits of $500 into a retirement account that pays an APR of 10.9 percent compounded monthly. If your first deposit will be made one month from now, how large will your retirement account be in 34 years?

Answer 1

To calculate the value of the retirement account after 34 years, use the formula for compound interest: A = P(1 + r/n)^(nt). Plugging in the given values, calculate the future value of the account.

Step-by-step explanation:

To calculate the value of the retirement account after 34 years, we can use the formula for compound interest: A = P(1 + r/n)nt, where A is the future value, P is the principal (initial deposit), r is the annual interest rate (in decimal form), n is the number of times interest is compounded per year, and t is the number of years.

In this case, the principal is $500, the annual interest rate is 10.9% (or 0.109 in decimal form), compounded monthly (n = 12), and the number of years is 34.

Plugging these values into the formula, we get:
A = 500(1 + 0.109/12)(12*34)

Calculating this will give us the value of the retirement account after 34 years.