Answer:
$713,449.15
Explanation:
Barry’s total personal amount to invest = Initial amount + additional amount
= $4,500 + 1,140
Barry’s total personal amount to invest = $5,640
Since Barry’s employer would match this amount, total amount to invest will be;
Total amount to invest for Barry = $5,640 + $5,640 = $11,280
The new amount Barry will have at retirement can be calculated using future value of an annuity formula stated as follows:
FV = M × {[(1 + r)^n - 1] ÷ r} ................................. (1)
Where,
FV = Future value of the amount at the retirement
M = Total amount to contribute yearly by Barry and his employer = $11,280
r = Rate of return = 7% = 0.07
n = number of periods = 65 – 40 = 25 years
Substituting the values for into equation (1), we have:
FV = $11,280 × {[(1 + 0.07)^25 - 1] ÷ 0.07}
= $11,280 × {[(1.07)^25 - 1] ÷ 0.07}
= $11,280 × {[5.42743264012289 - 1] ÷ 0.07}
= $11,280 × {4.42743264012289 ÷ 0.07}
= $11,280 × 63.2490377160413
FV = $713,449.15
Therefore, Barry would have $713,449.15 at retirement if he could invest an additional $1,140 per year that his employer would match.
