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An individual is 48 years old. At the end of each​ month, hedeposits ​$300 in...

An individual is 48 years old. At the end of each month, he deposits $300 in a retirement account that pays 4.82% interest compounded monthly. (a) After 12 years, what is the value of the account? (b) If no further deposits or withdrawals are made to the account, what is the value of the account when the individual reaches age 65?

After 12 years, the value of the account will be $

Solutions

Expert Solution

1.Information provided:

Monthly investment= $300

Time= 65 years - 48 years = 17 years*12 = 204 months

Interest rate= 4.82%/12 = 0.4017% per month

The question is solved by computing the future value.

Enter the below to calculate the future value:

PMT= -300

N= 204

I/Y= 0.4017

Press the CPT key and FV to calculate the future value.

The value obtained is 94,512.46.

Therefore, the value of the account is $94,512.46 when the individual reaches age 65.

2.Information provided:

Monthly investment= $300

Time= 12 years*12 = 144 months

Interest rate= 4.82%/12 = 0.4017% per month

The question is solved by computing the future value.

Enter the below to calculate the future value:

PMT= -300

N= 144

I/Y= 0.4017

Press the CPT key and FV to calculate the future value.

The value obtained is 58,340.79.

Therefore, the value of the account in 12 years is $58,340.79.

jeff jeffy answered 2 years ago
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