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A​ full-time worker aged 2525 invests ​$250250 a month in a fund which has an average yearly return of 7.27.2​% compounded monthmonthly. ​(a) The worker wants to estimate what they will have for retirement when they are 6060 years old if the rate stays constant. Assume monthmonthly compounding. ​(b) If the worker makes no further deposits and makes no withdrawals after age 6060​, how much will they have for retirement at age 6666​?

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facundobuzzetti

Answer:

Instructions are below.

Explanation:

Giving the following information:

The number of years/months= 60 - 25= 35*12= 420

Interest rate= 0.072/12= 0.006 compounded monthly

Monthly investment= $250

​(a) We need to use the following formula:

FV= {A*[(1+i)^n-1]}/i

A= monthly deposit

FV= {250*[(1.006^420)-1]} / 0.006

FV= $472,306.75

(b) I assume that the monthly compounded continues.

Number of months= 6*12= 72

We need to use the following formula:

FV= PV*(1+i)^n

FV= 472,306.75* (1.006^72)

FV= $726,572.28

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