Morningstar.com is a useful personal and business investment site with in-depth

Question

Morningstar.com is a useful personal and business investment site with in-depth detail on personal financial planning. After reading a March 19, 2009, article, “Preparing a Portfolio for Retirement,” Arlene Supple, 47 years old, is evaluating her retirement portfolio. She paid her house off in anticipation of an early retirement. In addition, she has invested wisely in her company’s 401k, a Roth IRA, municipal bonds, and certificates of deposit. She has amassed $295,000 in her diversified portfolio. Today, she has the opportunity to deposit her money at 5% compounded quarterly. Assume she retires at 54 years old.How much will her investment be worth?

Explanation / Answer

A/c balance after 54 years PV×(1+r)^n Here, 1 Interest rate per annum 5.00% 2 Number of years                                          7 3 Number of compoundings per per annum                                          4 1÷3 Interest rate per period ( r) 1.25% 2×3 Number of periods (n)                                        28 Present value (PV) $                         295,000 A/c balance after 54 years $                   417,717.73 295000*(1+1.25%)^28

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