Question

Rachael deposits $1,500 into a retirement fund each year. The fund earns 7.2% annual interest, compounded monthly. If she opened her account when she turned 19, how much will she have by the time she turns 55? How much of that amount will be interest earned? Round your answers to the nearest dollar.

P.S: I need desperate help!

Answer 1

Explanation:

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

In this case, P = 1500, r = 0.072 (7.2% expressed as a decimal), n = 12 (since the interest is compounded monthly), and t = 55 - 19 = 36 years.

Plugging these values into the formula, we get:

A = 1500(1 + 0.072/12)^(12*36)

A ≈ $191,292.55

So Rachael will have approximately $191,292.55 in her retirement fund by the time she turns 55.

To calculate the amount of interest earned, we can subtract the principal from the final amount:

Interest = A - P

Interest ≈ $120,292.55

So Rachael will have earned approximately $120,292.55 in interest.