Question

Suppose at age 22 mort starts investing 200$ at the end of each month into a savings plan with an apr of 2.9% and he continues to do so through the next 43 years ( planning to retire at age 65). How much will be in his savigns plan towards retirement? How much of his balance was from the interested loans

Answer 1

Kindly check explanation

Explanation:

Given the following :

Monthly Payment (PMT) = 200 at the end of each period

interest rate = 2.9% = 0.029/12 = 0.0024166

Period (n) = 43 years x 12 = 516

Using the future value(FV) of an ordinary annuity:

FV = PMT[(1 + r)^n - 1] / r

FV = 200[(1 + 0.0024166)^516 - 1] / 0.0024166

FV = 200[(1.0024166)^516 - 1] / 0.0024166

FV = 200(2.4745372) / 0.0024166

FV = 204,794.93

Amount which will be in saving plan towards retirement = $204,794.93

Interest amount :

$204,794.93 - total monthly deposits

$204,794.93 - (200 * 516)

$204,794.93 - $103,200

= $101,594.93