You are planning to make monthly deposits of $490 into a retirement account that pays 10 percent...

Question:

You are planning to make monthly deposits of $490 into a retirement account that pays 10 percent interest compounded monthly. If your first deposit will be made one month from now, how large will your retirement account be in 30 years? b) In the previous problem, suppose you make $3,600 annual deposits into the same account.

Saving for Retirement:

One way to fund retirement is to make periodic contributions to a savings account that provides positive returns. Suppose the periodic contribution is M and the account provides periodic return R, the value of the account after T periods is {eq}\sum_{t=1}^{T}{M(1 + R)^{T-t}}. {/eq}

Answer and Explanation:

a) in 30 years, there are 30*12 = 360 months. Effective monthly rate is 10%/12 = 0.83%. The value of the account after 30 years is...

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How to Calculate Future Value: Formula & Example

from Financial Accounting: Help and Review

Chapter 5 / Lesson 16
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