In: Finance
as part of your retirement package, your company has agreed to pay you monthly payments over the next three years that have the following characteristics.
Given this information, determine how much you should expect to have in your investment account one month after your 36th deposit, on December 31st of Year 3.
Answer is whole dollars, rounded to the nearest dollar, with no punctuation. For example, if your answer is $150,224.75, enter “150225
Answer:
Effective annual rates of return (over the 12 months fro January 1st to December 31st of each year): Years 1 and 2 = 6.6759627%
Monthly Interest rate = (1 + 6.6759627%) 1/12 - 1 = 0.0054
Effective annual rates of return (over the 12 months fro January 1st to December 31st of each year): Year 3(and after)= 8.2139158%
Monthly Interest rate = (1 + 8.2139158%) 1/12 - 1 = 0.0066
Year 1:
Monthly payments for the first year will be $4,000 per month paid on start of each month
Amount at end of year 1:
FV (rate, nper, pmt, pv, type)
= FV (0.0054, 12, -4000, 0, 1)
=49718.613796
Year 2:
Monthly deposit in year 2 = 4000 *(1 + 1%) = $4,040
Amount at end of year 2:
= FV (0.0054, 12, -4040, -49718.613796, 1)
=103253.6098
Year 3:
Monthly deposit in year 3 = 4040 *(1 + 1%) = $4,080.4
Amount at end of year 3:
= FV (0.0066, 12, -4080.40, -103253.6098, 1)
=162851.84
=162852
Amount you should expect to have in your investment account on December 31st of Year 3 = 162852