Question

Judith has just become eligible to participate in her​ company's retirement plan. Her company matches her contributions dollar for dollar. The plan averages an annual return of 13 percent interest compounded annually. Judith is 40 and plans to work until age 65. If she contributes ​$220 per month and assuming that the account will continue to return 13 percent per year compounded​ annually, how much will she have in her retirement plan at​ retirement? Can somebody please show me the work to solving this question?

Answer 1

Simply use the Future value of annuity formula

Given monthly deposits,

No of years = Maturity- present age=65-40=25

here, Deposits and interest are not matching. Deposits are made monthly and interest is compounding annually. So we have to use the following formula to match the same,

where m is no of compounding

p is no of payments made

i is the interest rate given.

r=0.0102368443581764

Deposit per month PMT =220+220 (adding another because employer matches dollar for dollar )

n=25*12= 300

FV= $869,549.08

Rate please.!