Question

Leo did not start saving for his retirement when he started working. Instead, he waited until age forty. Now he only has 26 years to save for retirement. Assume that he puts the $300 per month into his IRA. At a 9.8% average annual return how much would have Leon have for contributions made at the beginning of the month?

a. $463,588.93

b. $459,681.63

c. $427,956.75

d. $431,451.73

Answer #1

**Given,**

**Monthly deposit (M) = $300**

**No. of years = 26 years**

**Annual return = 9.8% or 0.098**

**Solution :-**

**No. of months (n) = 26 years x 12 months = 312
months**

**Monthly return (r) = 0.098/12 =
0.0081666667**

**Future value = M/r x [(1 + r) ^{n} - 1] x (1 +
r)**

**= $300/0.0081666667 x [(1 + 0.0081666667) ^{312}
- 1] x (1 + 0.0081666667)**

**= $300/0.0081666667 x [(1.0081666667) ^{312} - 1]
x (1.0081666667)**

**= $300/0.0081666667 x [12.64993375 - 1] x
(1.0081666667)**

**= $300/0.0081666667 x 11.64993375 x 1.0081666667 =
$431451.73**

**Thus, Leon would have $431451.73 for contributions made
at the beginning of the month.**

Leo did not start saving for his retirement when he started
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b. $443,500.73
c. 427,956.75
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