Question

Starting today, you are going to contribute $150 on the first of each month to your retirement account. Your employer will contribute an additional 50% of the amount you contribute. If both you and your employer continue to do this and you can earn an effective monthly rate of 0.52%, how much will you have in your retirement account 30 years from now?

Question 6 options:

$237,906

$243,854

$249,801

$255,749

$261,697

Answer 1

Ans:- This is a case of an annuity due because the investment is done at start of each month. we will use the FV function of excel to find the answer.

Rate = 0.52%, Nper = 360, Pmt = $150 + $150*25% = -225, PV = 0, Type = 1.

Therefore, the Future Value after 30 years will be $237,906. option (a) is the right answer.

Note:- Put Type = 1 when the question is an annuity due and Type = 0 when the question is an ordinary annuity.

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