Question

Assume you begin to plan for retirement. You currently have $5,000 saved up and can afford to invest $600 a month until retirement. If you retire in 40 years and can earn an interest rate of 9 percent, how much will be in your account when you retire?

Answer 1

Assume that the investment is done at the end of each month.

and since the it is monthly payment then assume its as monthly compunding.

We can use the financial calculator

PV = -5000

I/Y = 0.75 (because 9/12 = 0.75 monthly)

PMT = 600

N = 480 ( because 40*12 = 480 periods)

Press CPT and then Press FV'

we get FV as 328,994.36

Note : We have assumed that it is a normal annuity and also it as a monthly compounding as the information is not provided in the question.