Question

You are planning to make monthly deposits of $400 into a retirement account that pays 10 percent interest compounded monthly. if your first deposit will be made one month from now, how large will your retirement account be in 30 years?

Answer 1

Answer:

904,195.17

Explanation:

FV=Payment*((1+r/12)^n)-1)/(r/12) r=rate n=months

(12months * 30 =360 periods) (Rate: 10%/100 =0.1)

=400 *((((1 + (0.10/12))^(12*30) – 1)) / (0.10/12)))

=400*2260.48

=904,195.17

Answer 2

You are planning to make monthly deposits of $400 into a retirement account that pays 10 percent interest per annum compounded monthly. if your first deposit will be made one month from now, your retirement account in 30 years will have $7869.38.

What is compound interest?

Compound interest is the addition of interest to the principal sum of a loan or deposit, or in other words, interest on principal plus interest.

$Amount = Principle(1 + \frac{Rate}{100})^{Time\ period}$

When the principle amount is compounded monthly, formula becomes:

$Amount = Principle(1 + \frac{Rate}{12*100})^{Time\ period\ in\ months}$

Given,

Principle amount = $400

Rate of interest = 10%

Time period = 30 years less 1 month = 359 months

Amount  $= 400(1 + \frac{10}{1200})^{359} = 7869.38157$

Learn more about compound interest here

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