Question

Chad's retirement fund has an accumulated amount of $50,000. If it has been earning interest at 4.12% compounded monthly for the past 17 years, what is the size of the equal payments that he deposited at the beginning of every 3 months?

Answer 1

The size of the equal payments that Chad deposited at the beginning of every 3 months is $248,046.85.

Step-by-step explanation:

To calculate the size of the equal payments that Chad deposited at the beginning of every 3 months, we can use the formula for the future value of an annuity.

The future value formula is given by:

FV = P*((1+r)^n - 1)/r

Where:

• FV is the future value of the annuity
• P is the size of each payment
• r is the interest rate per compounding period (monthly in this case)
• n is the number of compounding periods (17 years * 12 months = 204 months)

Plugging in the values, we get:

FV = 50000*((1+0.0412/12)^204 - 1)/(0.0412/12)

Simplifying the equation gives:

FV = $50,000*((1.00343)^204 - 1)/0.00343 = $248,046.85

Therefore, the size of the equal payments that Chad deposited at the beginning of every 3 months is $248,046.85.