Question

Ed turns 34 and deposits $100 at the end of each month in IRA that earns 9% interest p.A compounded monthly. Find how much will be in the IRA if Ed retires at the age 60.

Answer 1

FV= $123,879.85

Explanation:

Giving the following information:

Montlhy deposit (A)= $100

Monthly interest rate (i)= 0.09/12= 0.0075

Number of periods (n)= 12*26= 312 months

To calculate the future value, we need to use the following formula:

FV= {A*[(1+i)^n-1]}/i

A= monthly deposit

FV= {100*[(1.0075^312) - 1]} / 0.0075

FV= $123,879.85