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In: Finance

Suppose that you just turned 25 years old and decide to put $5,750 into investments at...

Suppose that you just turned 25 years old and decide to put $5,750 into investments at the end of each year until age 60 (35 years from now). You have no savings. Your EAR is 4.7%. How much will you have by age 60?

Solutions

Expert Solution

Given that,

Annual investment PMT = $5750

time period of investment = 35 years

interest rate earned r = 4.7%

So, account value after 35 years can be calculated using FV formula of annuity:

FV = PMT*((1+r)^t - 1)/r = 5750*((1+0.047)^35 - 1)/0.047 = $488185.13

So, amount avaliable at the age of 60 is $488185.13

jeff jeffy answered 2 years ago
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