Assume that you contribute $390 per month to a retirement plan for 15 years. Then you are able to...

Question

Assume that you contribute $390 per month to a retirement plan for 15 years. Then you are able to increase the contribution to $780 per month for another 25 years. Given a 6 percent interest rate, what is the value of your retirement plan after the 40 years?

Robert · Accepted Answer

Assume that you contribute $390 per month to a retirement plan for 15 years. Then you are able to 
increase the contribution to $780 per month for another 25 years. Given a 6 percent interest rate, what 
is the value of your retirement plan after the 40 years?
Solution: 
Annual interest rate = 6% 
Monthly interest rate = 06% / 12 = 0.5%  
1. FV (after 40 years) of contribution for first 15 years 
FV of annuity = P*[(1+r)^n-1/r] 
Here, 
P = 390 
r= 0.5% 
n = 15*12 = 180 
FV of annuity = 390*[(1+0.

Assume that you contribute $390 per month to a retirement plan for 15 years. Then you are able to increase the contribution to $780 per month for another 25 years. Given a 6 percent interest rate,...

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