You are to make monthly deposits of $400 into a retirement account that pays 10.

Question

You are to make monthly deposits of $400 into a retirement account that pays 10.5 percent interest compounded monthly.

Required:
If your first deposit will be made one month from now, how large will your retirement account be in 30 years?

I saw a similar problem but done with formulas.. I want to know how to do it with calculator functions.

I got so far:

PMT = 400
N = 30
PV = 0
And we need to calculate for FV
The interest is tripping me up.. it's 10.5 but compounded monthly.. how does that affect the 1/Y input?

Thanks!

Explanation / Answer

you must do the entire calculation in MONTHLY. so you need to convert few numbers.

monthly PMT = 400
N = 30 years = 30*12 months = 360 months
PV = 0
interest = 10.5% per year
= [(1+10.5%)^(1/12) - 1] compounded monthly
= 0.8355% compounded monthly

now you can use the calculator to get the FV.
remember the trick is converting all numbers into the installment payment period.

Please rate my answer!
Thanks in advance :)

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