Question

You are to make monthly deposits of $625 into a retirement account that pays an APR of 11.4 percent compounded monthly. If your first deposit will be made one month from now, how large will your retirement account be in 34 years?

Answer 1

the future value of an annuity is $3,049,771.89

Step-by-step explanation:

The computation of the future value of an annuity is shown below:

= Monthly deposit × {(1 + interest rate)^number of years - 1 ÷ rate of interest}

= $625 × {(1 + 11.4% ÷ 12)^34 × 12 - 1 ÷ 11.4% ÷ 12}

= 625 × ((1 + 0.95%)^408 - 1) ÷ 0.95%

= 625 × 4,879.64

= $3,049,771.89

Hence, the future value of an annuity is $3,049,771.89