Question

At 58, thomas Jones knows that he needs to save more, he decides to invest $300 per quarter in a mutual fund he hopes will earn 10% compound quarterly. find the accumulated amount at age 65.

please explain solution.

Answer 1

Number of quarters = (65-58) *4
	=7*4
	=28
accumulated amount at age 65 would be calculated as below.
Future Value of an Ordinary Annuity
c= Cash Flow	300
i= Interest Rate =10%/4	3%
n= Number Of Periods	28
Future Value of an Ordinary Annuity
= C*[(1+i)^n-1]/i
Where,
C= Cash Flow per period
i = interest rate per period
n=number of period
= $300[ (1+0.03)^28 -1] /0.03
= $300[ (1.03)^28 -1] /0.03
= $300[ (2.2879 -1] /0.03]
= $12,879.28