Question

Cheng Jones wants to invest $1,100 paid at the end of each month for the next 10 years in his IRA. If he makes these payments and he receives an interest rate of 6.5%, compounded monthly, how much will he have at the end of the 10 years?

Answer 1

To find out how much Cheng Jones will have at the end of 10 years, we can use the future value of an ordinary annuity formula.

Step-by-step explanation:

To find out how much Cheng Jones will have at the end of 10 years, we can use the future value of an ordinary annuity formula:

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

1. P = $1,100 (monthly payment)
2. r = 6.5% / 12 = 0.00542 (monthly interest rate)
3. n = 10 * 12 = 120 (number of months)
4. Substituting these values into the formula, we have:
   Future Value = 1100 * (((1 + 0.00542)^120) - 1) / 0.00542 = $190,344.58

Therefore, Cheng Jones will have approximately $190,344.58 at the end of 10 years.