Question

Parker's retirement account has a current balance of $25,000. If he adds $600 per month to the account for the next 30 years, how much will the account be worth? (Assume an interest rate of 11.00% per year).

Group of answer choices

$688,310

$241,000

$2,350,414

$1,682,711

Answer 1

Future value of current account balance after 30 years = 250000*(1+11%/12)*30*12=25000*(1.0091667)^360

=25000*(26.708098)= 667702.44

Future value of annuity of 600 per month for 360 months at (11%/12) 0.91667% per month is given as=

$600 * Future value of annuity factor at  0.91667% for 360 months

Hence Future value of 600

=600*2804.5197

=1682711.8419

(Note : Future value of annuity factor at  0.91667% for 360 months in excel as

=2804.5197

And using financial calculator as -

Pmt=-1

I/y=0.9167

N=360

Compute=FV)

Hence future value after 30 year i.e worth of the deposit= future value of current account balance + future value of monthly deposit=

= 667702.44+1682711.84= 2350414.28

Hence the correct answer is option c i.e 2350414