Question

) As the owner of a successful and profitable company, you plan to retire in 25 years. To fund your retirement, you will start putting $1,000 into an investment account at the end of each month until retirement. A. If you expect the account to average a 7% return, compounded monthly, how much money will be in the account when you reach retirement? B. How much money will be in the account if the $1,000 monthly contributions are made at the beginning of each month?

Answer 1

Answer A:

Monthly deposit at the end of each month = PMT = $1,000

Monthly rate of interest = 7%/12

Number of months = NPER = 25 *12 = 300

Money in account at retirement = FV (rate, nper, pmt, pv, type) = FV (7%/12, 300, -1000, 0, 0) = $810,071.69

Money in account at retirement = $810,071.69

Answer B:

Money in account at retirement  if the $1,000 monthly contributions are made at the beginning of each month:

= FV (rate, nper, pmt, pv, type)

= FV (7%/12, 300, -1000, 0, 1)

= $814,797.11

Money in account at retirement = $814,797.11