Question

You just started a new job at a company that includes a retirement plan as one of its benefits. Every month, the company invests $200 in your retirement account earning 4.5% compounding monthly. Your plan is to work at the company for 5 years. How much will you have in your retirement account by then?

Answer 1

To calculate the amount accumulated in your retirement account after 5 years, use the formula for compound interest. The final amount will be approximately $286.28.

Step-by-step explanation:

To calculate the amount accumulated in your retirement account after 5 years, you can use the formula for compound interest: A = P(1 + r/n)^(nt).

1. Find the values for the variables: P = $200 (monthly investment), r = 4.5% (annual interest rate), n = 12 (number of times interest is compounded per year), and t = 5 (number of years).
2. Convert the annual interest rate to a decimal: r = 4.5/100 = 0.045.
3. Substitute the values into the formula: A = 200(1 + 0.045/12)^(12*5).
4. Simplify the equation by evaluating the exponential term: A = 200(1.00375)^60.
5. Calculate the final amount in your retirement account by multiplying: A = $200 * 1.4313832 ≈ $286.28