David is currently 40 years old and plans to save regularly for his retirement, which he plans to begin at age 65. He intends to deposit $1, 500 at the end of each month into a savings account with an annual interest rate of 4.85%. How much money will be in his account when he retires (25 years later)? (Hint: ordinary annuity)
Added by Anita C.
Step 1
The formula is: \[ FV = P \times \frac{(1 + r)^n - 1}{r} \] Where: - \( FV \) = future value of the annuity - \( P \) = payment amount per period - \( r \) = interest rate per period - \( n \) = total number of payments ** Show more…
Show all steps
Your feedback will help us improve your experience
Ruchi Singh and 78 other Principles of Accounting educators are ready to help you.
Ask a new question
Labs
Want to see this concept in action?
Explore this concept interactively to see how it behaves as you change inputs.
Recommended Videos
Solve each problem. Round answers to the nearest cent. At the end of each quarter, a 45-year-old man puts $\$ 1500$ in a retirement account that pays $1.5 \%$ interest compounded quarterly. When he reaches age $55,$ he withdraws the entire imount and places it in a fund that pays $0.75 \%$ annual interest compounded monthly. From hen on, he deposits $\$ 400$ in the fund at the end of each month. How much is in the account when he reaches age $60 ?$
Further Topics in Algebra
Geometric Sequences
Assume a retirement account starts with no money in it and always pays 6% APR compounding monthly. On your 25th birthday you make a $1,000 dollar deposit into the account. At the end of the first month after your 25th birthday, and continuing at the end of every month up to and including your 40th birthday, you deposit $150 in the same account. After this last payment, no further payments or with drawls are made from the account until you reach your 65th birthday. How much money would be in the retirement account at this time? Round your answer down to the nearest dollar.
Sri K.
Starting at age 50, a woman puts $1600 at the end of each quarter into a retirement account that pays 7% interest compounded quarterly. When she reaches age 60, she withdraws the entire amount and places it in a mutual fund account that pays 9% compounded monthly. From then on she deposits $400 in the same mutual fund at the end of each month. How much is in the account when she reaches age 65?
Manasvee S.
Recommended Textbooks
Horngren’s Cost Accounting
Cost Accounting A Managerial Emphasis
Principles of Accounting Volume 1: Financial Accounting
Transcript
18,000,000+
Students on Numerade
Trusted by students at 8,000+ universities
Watch the video solution with this free unlock.
EMAIL
PASSWORD