You are planning to make monthly deposits of $450 into a retirement account that pays 8 percent interest compounded monthly. If your first deposit will be made one month from now, how large will your retirement account be in 25 years?

You are planning to make monthly deposits of $450 into a retirement account that pays 8 percent interest compounded monthly. If your first deposit will be made one month from now, how large will your retirement account be in 25 years? (Do not round intermediate calculations and round your final answer to 2 decimal places, e.g., 32.16.)

Future value

$

 

Explanation:

The time line is:

0	1									300
	$450	$450	$450	$450		$450	$450	$450	$450	$450
										FV

The equation to find the FVA is:

FVA = C{[(1 + r)t − 1] / r}

FVA = $450[{[1 + (.08 / 12)]300 – 1} / (.08 / 12)]

FVA = $427,961.88

   

Calculator Solution:

Note: Intermediate answers are shown below as rounded, but the full answer was used to complete the calculation.

   
 

Enter

25 × 12

8% / 12

$450

N

I/Y

PV

PMT

FV

Solve for

$427,961.88