Question

Once you graduate, you decide to start investing $1000 per month for 40 years when you’ll reach retirement. You estimate you’ll earn 6% annually (interest is compounded monthly). If you’re correct, what will your balance be at retirement? Give you answer to 2 decimal places.

Answer 1

Periodic monthly deposit for 40 year = $1000 per month

Calculating the Future Value using Future Value of Ordinary Annuity formula:-

Where, C= Periodic Deposit = $1000

r = Periodic Interest rate = 6%/12 = 0.5%

n= no of periods = 40 years*12 = 480

Future Value = $1,991,490.73

So, balance be at retirement is $1991,490.73

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