Question

At your current job you set aside $120 at the end of each month in an investment that earns 8.5%, compounded monthly. You continue this for 5 years. You then change jobs and can no longer contribute to this investment. If the amount and interest rate remains the same and there are no deposits or withdrawals for the next 12 years, what will the value of the account be?

The value will be $_____ ?. (Round to 2 decimal places.)

Answer 1

r = 8.5%/12 = 0.007083333333 monthly rate

n = 5 * 12 = 60

First, let's find the future value at year 5

Now, with this as PV, let's move this forward for 12 years.

FV12 = PV * (1 + r)^n

n = 12 * 12 = 144 months

r = 8.5%/12 = 0.007083333333 monthly rate

FV12 = 8,933.0924807969 * (1 + 0.007083333333)^144

FV12 = $24,684.2924031175

The value will be $24,684.29