Question

Lena has just become eligible to participate in her​ company's retirement plan. Her company does not match​ contributions, but the plan does average an annual return of 12%. Lena is 40 and plans to work to age 65. If she contributes ​$200 per​ MONTH compounded ANNUALLY, how much will she have in her plan at​ retirement?

Answer 1

Answer:

$375,769.33

Explanation:

Premium amount(PMT) = $200

rate of return(r) = 12% annual = 12/12 = 1% monthly = 0.01

Number of payment(n) = (65-40) = 25 Annual = 25 x 12 = 300 monthly

Future value = ?

Computation:

$Future\ Value = PMT [\frac{(1+i)^{n}-1}{i}] \\ = 200 [\frac{(1+0.01)^{300}-1}{0.01}]\\= 200 [\frac{(1+.01)^{300}-1}{0.01}]\\\\= 200 [\frac{19.7884663-1}{0.01}]\\\\= 200 [\frac{18.7884663}{0.01}]\\\\=200(1878.84663)\\=375,769.326$

Future value is $375,769.33