Question

You are celebrating your 28th birthday today. You have decided to set up a retirement account and start depositing an equal amount of money into the account each month beginning one month from today. How much will be in the account on your 60th birthday, if your monthly investment is $840? Assume your investments will return 11 percent per year throughout the investment period.

Answer 1

$2,954,997.97

Step-by-step explanation:

The computation of the amount on the 60th birthday is shown below:

Future value at Ordinary Annuity = Monthly investment × (((1 + interest rate )^number of years - 1) ÷ interest rate)

= $840 × (((1+ 11 ÷ 1200)^(32 × 12) - 1) ÷ (11 ÷ 1,200))

= $2,954,997.97

The 1,200 is come from

= 12 months × 100

And, the 32 years is come from

= 60th birthday - 28th birthday

= 32th birthday

We simply applied the above formula to determine the amount on the 60th birthday