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3. How much is the future value of a retirement plan to be obtained in December...

3. How much is the future value of a retirement plan to be obtained in December 2040 if the sum of $ 250 is contributed monthly since January 2017 and the plan returns an annual compound interest of 4.8%? Analyze your results and discuss the advantages or disadvantages of this plan.
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Answer #1

The future value of the contributions is found using the following equation

The amount obtained at the end of December 2040 = $134,828.27

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The main advantages of this plan is that you can make small contributions into the account retirement instead of making a large payment.

The disadvantage of this plan is that it is not a diversified plan as the investment is made into one single retirement account. The rate of return of the retirement account is also low. The investor should diversify the investments into different assets to obtain higher returns.

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