Question

You wish to deposit $2000 into account to use for when you retire assume that you’re 25 years old and you plan to withdraw the money when you’re 65 years old with a loan that earns 5.25% compounded monthly how much will be in your account

Answer 1

To calculate the amount that will be in your account when you retire, we can use the formula for compound interest:

A = P(1 + r/n)^(nt)

Where:

A is the final amount in the account

P is the principal amount (initial deposit)

r is the annual interest rate (as a decimal)

n is the number of times the interest is compounded per year

t is the number of years

Given:

P = $2000

r = 5.25% = 0.0525 (as a decimal)

n = 12 (monthly compounding)

t = 65 - 25 = 40 years

1. Plug in the values into the compound interest formula:

A = 2000(1 + 0.0525/12)^(12*40)

2. Simplify inside the parentheses:

A = 2000(1.004375)^(480)

3. Calculate the exponent:

A = 2000(2.42742962062)

4. Multiply the principal amount by the result:

A = $4,854.86

Therefore, when you retire at 65 years old, there will be approximately $4,854.86 in your account if you deposit $2000 and earn an annual interest rate of 5.25% compounded monthly.