Question

Suppose that Jon Walters wants to save money to go on a cross country ski tour...

Suppose that Jon Walters wants to save money to go on a cross country ski tour when he retires in 21 years. If he makes semiannual deposits of $400 into a fund that pays 4.1% interest compounded semiannually, how much will be in the fund when he retires?

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Answer #1

Information provided:

Semi-annual deposit= $400

Interest rate= 4.1%/2= 2.05%

Time= 21 years*2= 42 semi-annual periods

The amount in the account when Jon retired is calculated by computing the future value.

Enter the below in a financial calculator to compute the future value:

PMT= 400

I/Y= 2.05

N= 42

Press the CPT key and FV to calculate the future value.

The value obtained is 26,244.27.

Therefore, the amount in the account when Jon retired is $26,244.27.

In case of any query, kindly comment on the solution.

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