Question

You start your working career when you are 24 years oldEach month, you deposit $144 into a pension planYou continue making deposits into the plan un you are 68 years oldWhat is the balance, in dollars, when the plan earns 6%, compounded monthly? Round your answer to the nearest cent

Answer 1

Using the monthly payment formula, it is found that the balance of the plan is of $26,731.23.

What is the monthly payment formula?

It is given by:

$A = P\frac{\frac{r}{12}\left(1 + \frac{r}{12}\right)^n}{\left(1 + \frac{r}{12}\right)^n - 1}$

In which:

• A is the monthly payment.

• P is the total amount.

• r is the interest rate.

• n is the number of payments.

The parameters for this problem are given as follows:

A = 144, r = 0.06, n = (68 - 24) x 12 = 528.

Then:

r/12 = 0.06/12 = 0.005.

$A = P\frac{\frac{r}{12}\left(1 + \frac{r}{12}\right)^n}{\left(1 + \frac{r}{12}\right)^n - 1}$

$144 = P\frac{0.005(1 + 0.005)^{528}}{(1 + 0.005)^{528} - 1}$

$P = 144\frac{(1 + 0.005)^{528} - 1}{0.005(1 + 0.005)^{528}}$

P = $26,731.23.

More can be learned about the monthly payment formula at brainly.com/question/26476748

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