Question

You have been able to save a little bit of money over the last five years,...

You have been able to save a little bit of money over the last five years, though it wasn't anything very formal. Still, you have $6456 sitting in an investment account. Now you're going to get serious and contribute to that account another $893 each month for 29 years. You believe you can earn a consistent 7.3% per year on this investment, compounding monthly. What should your balance be at the end of this investment plan (of 29 years)?

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Answer #1

Annual interest rate = 7.30%
Monthly interest rate = 7.30% / 12
Monthly interest rate = 0.6083%

Current balance = $6,456
Monthly saving = $893
Period = 29 years or 348 months

Accumulated sum = $6,456*1.006083^348 + $893*1.006083^347 + $893*1.006083^346 + ... + $893*1.006083 + $893
Accumulated sum = $6,456 * 1.006083^348 + $893 * (1.006083^348 - 1) / 0.006083
Accumulated sum = $6,456 * 8.2521312 + $893 * 1,192.1964749
Accumulated sum = $1,117,907.21

So, you will have $1,117,907.21 at the end of this investment plan of 29 years.

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