you plan to retire in 40 years. if you deposit $500 into your investment account at the end of every year during the 40-year period, what is the account balance at the time when you retire? the account carries an interest rate of 3%.
a. $37,700.63
b. $37,671.87
c. $37,690.87
d. $37,682.65
a. $37,700.63
| Account balance 40 years from now | = | Annual deposit * Future value of annuity of 1 | |||||||||
| = | $ 500 | * | 75.40126 | ||||||||
| = | $ 37,700.63 | ||||||||||
| Working: | |||||||||||
| Future value of annuity of 1 | = | (((1+i)^n)-1)/i | Where, | ||||||||
| = | (((1+0.03)^40)-1)/0.03 | i | 3% | ||||||||
| = | 75.4012597 | n | 40 | ||||||||
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