Question

20. Choose the correct answer.
Raymond contributes $2,500 per month in his retirement account. If his retirement account is earning 7.25% per year, compounded monthly, how much will he have in the account in 25 years?
$1,453,125
$750,000
$2,135,173.74
$804,375

Answer 1

Answer:

C. $2,135,173.74

Step-by-step explanation:

To calculate the future value of Raymond's retirement account after 25 years with monthly compounding interest, we can use the compound interest formula:

A=P(1+r/n)^(nt)

A = final amount

P = initial principal balance

r = interest rate

n = number of times interest applied per time period

t = number of time periods elapsed

A=2,500x12x25x(1+0.0725/12)^(12x25)

A=750,000x(1+0.00604167)^300

A=2,135,173.74

Therefore, Raymond will have approximately $2,135,173.74 in his retirement account after 25 years. So the correct answer is $2,135,173.74.