Question

You are planning to make monthly deposits of £400 into a retirement account that pays 7 per cent interest compounded monthly. Required: If your first deposit will be made one month from now, how large will your retirement account be in 40 years? (Round your answer to 2 decimal places (e.G., 32.16). The program includes a margin of error of +/- 1%.)

Answer 1

The retirement account will be $1,049,913.57 in 40 years.

Step-by-step explanation:

a) Data and Calculations:

Monthly deposits = $400

Interest rate = 7% compounded monthly

Annualized interest rate = 0.5833% (7%/12) monthly

Period of contribution = 40 years (40 x 12 = 480 months)

FV (Future Value) $1,049,913.57

PV (Present Value) $64,367.84

N (Number of Periods) 480.000

I/Y (Interest Rate) 0.583%

PMT (Periodic Payment) $400.00

Starting Investment $0.00

Total Principal $192,000.00

Total Interest $857,913.57