Question

jorge is investing in a 401(k) that promises 4.99% annual growth. he plans on investing $200 each month for 35 years (there is no employer matching). excel calculates an overall account balance of $226,714.31. how much of jorge's balance is interest?

Answer 1

The total interest earned by Jorge is $220,514.31.

Step-by-step explanation:

The total account balance of $226,714.31 comprises both the principal amount invested by Jorge and the interest earned over the 35-year period.

To calculate the amount of interest, we subtract the principal amount from the total account balance. In this case, the interest earned by Jorge would be $226,714.31 - $200/month x 12 months/year x 35 years = $220,514.31.

Therefore, the total interest earned by Jorge is $220,514.31.

Answer 2

Of Jorge's final 401(k) balance of $226,714.31, a total of $142,714.31 represents the interest earned over the 35 years, with the remaining amount being his personal contributions.

Step-by-step explanation:

Jorge's investment problem involves calculating the amount of interest earned on a 401(k) with a fixed annual contribution. To find how much of Jorge's final balance is interest, we first need to determine the total amount he has invested over the 35 years. Monthly contributions of $200 for 35 years (35 years * 12 months/year) total $84,000 of personal contributions. We then subtract this sum from the overall account balance of $226,714.31 to find the interest earned.

Interest earned = Final balance - Total contributions

Interest earned = $226,714.31 - $84,000

Interest earned = $142,714.31

Therefore, Jorge's balance consists of $142,714.31 in interest over the 35 years.