Question

To plan for retirement, Charmaine deposits $107 each month in an annuity that pays 7% interest, compounded monthly. Payments will be made at the end ofeach month. Find the total value of the annuity in 26years.Do not round any intermediate computations, and round your final answer to the nearest cent.

Answer 1

Given the question in the image, the following are the solution steps to answer the question.

STEP 1: Write the given values

`\begin{gathered} P=107 \\ rate=(7)/(100)=0.07 \\ n=12\cdot26=312\text{ since it is compunded monthly for 26 years} \\ t=26 \end{gathered}`

STEP 2: Write the formula for calculating total value of the annuity

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

STEP 3: Calculate the value of the annuity