Question

you plan to retire in 40 years. if you deposit $500 into your investment account at...

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

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Answer #1

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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