calculate the following future value given the assumptions below: Assume an individual invests $250/mo for 30 years at an expect

Question

2 years ago

10

ed rate of return of 8 percent

1 answer:

xz_007 [3.2K] · Answer 1 · 2023-06-02T15:10:44+03:00

According to the Question, We are given,

An individual invests $250/m for 30 years at an expected rate of return of 8 percent.

To Calculate the Future Value,

<h3><u>SOLUTION</u></h3>

Here, the deposits will be same every month, so it is an annuity. We will use the following future value of annuity formula:

FVA = P × ((1 + r)ⁿ - 1 / r)

where, FVA is future value of annuity,

P is the periodical amount = $250,

r is the rate of interest = 8% pa,

so monthly rate = 8% / 12 = 0.67%

and n is the time period = 30 × 12 = 360 months

Now, putting these values in the above formula, we get,

FVA = $250 × ((1 + 0.6667%)360 - 1 / 0.6667%)

FVA = $250 × ((1 + 0.006667)360 - 1 / 0.006667)

FVA = $250 × ((1.006667)360 - 1 / 0.006667)

FVA = $250 × ((10.9357296578 - 1 / 0.006667)

FVA = $250 × (9.9357296578 / 0.006667)

FVA = $250 × 1490.28493442

FVA = $372571.23

So, future value is $372571.23

To know more about Future Value, check the given links.

#SPJ4