You make $7,200 annual deposits into a retirement account that pays 11.3 percent

Question

You make $7,200 annual deposits into a retirement account that pays 11.3 percent interest compounded monthly

How large will your account balance be in 33 years? (Enter rounded answer as directed, but do not use rounded numbers in intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)

How large will your account balance be in 33 years? (Enter rounded answer as directed, but do not use rounded numbers in intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)

Explanation / Answer

Calculation of Future value of investment using future value of annuity formula:

Future value of annuity = P * ((1+r)^n-1) / r

P =Annual deposit = $7200

r= rate of interest = 11.3% = 0.113

n= number of years = 33

Hence ,

Future value of annuity = 7200 * ((1+0.113)^33-1) / 0.113

= 7200 * (34.2247609-1) / 0.113

= 7200 * (33.2247609/0.113)

= 7200 * 294.024433

=$2116975.92

Hence account balance will be $2116975.92 in 33 years.

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