Question

Leo plans to save $300 per month towards retirement at the begining of each month. How much would he have at the end of 45 years, assuming an interest rate of 10.2%?

a. 3,402,878.80

b. 3,170,956.77

c. 3,166,933.66

d. 3,193,377.55

Answer 1

Information provided:

Monthly saving= $300

Time= 45 years*12= 540 months

Monthly interest rate= 10.2%/12= 0.85%

The question is concerning finding the future value of an annuity due. Annuity due refers to annuity that occurs at the beginning of a period.

This can also be solved using a financial calculator by inputting the below into the calculator in BGN mode:

The financial calculator is set in the end mode. Annuity due is calculated by setting the calculator to the beginning mode (BGN). To do this, press 2ndBGN 2ndSET on the Texas BA II Plus calculator.

Enter the below in a financial calculator to compute the future value of ordinary annuity:

PMT= -300

N= 540

I/Y= 0.85

Press the CPT key and FV to compute the future value of annuity due.

The value obtained is 3,402,878.80

Therefore, he would have $3,402,878.80 at the end of 45 years.

Hence, the answer is option a.