Seamus McIntyre started saving for retirement today by investing $241 in an account earning 0.0419. He...

Seamus McIntyre started saving for retirement today by investing $241 in an account earning 0.0419. He plans to continue with monthly contributions of the same amount for 34 years. The present value of his investment is:

Expert Solution

Solution

Present value of annuity due=Annuity payment*((1-(1/(1+r)^n))/r)*(1+r)

where

r-discount rate per period=.0419/12=0.003491667 per month

n-number of periods -34*12=408

Annuity payment-241

Putting values in formula

Present value of annuity due=241*((1-(1/(1+0.003491667)^408))/0.003491667)*(1+0.003491667)

=$52556.197(Present value of his investment)

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