Question

4. Murphy started putting $100/month into his 401(k) earning 6% APR when he was 25 years old. How much will be in his account when he retires at age 65, if interest is compounded monthly

Answer 1

Answer:

The amount in his account is $199,149.07

Explanation:

The computation of the amount in his account is shown below:

= {Compounding period × per month amount × {(1 + rate of interest ÷ Compounding period)^Compounding period × years - 1}} ÷ { rate of interest}

= {12 × $100 × {(1 + 0.06 ÷ 12)^12 × 40 - 1}} ÷ {0.06}

= $199,149.07

Years should be

= 65 - 25

= 40

Hence, the amount in his account is $199,149.07