SOLUTION: I asked this question a few days ago and I am waiting for an answer. I hope I will get one today. Suppose that you save for retirement by contributing the same amount each mont

Question 72456This question is from textbook For All Practical Purposes
: I asked this question a few days ago and I am waiting for an answer. I hope I will get one today.
Suppose that you save for retirement by contributing the same amount each month from your 23rd birthday until your 65th birthday, in an account that pays a steady 5% annual interest compounded monthly.
a) How much will be in your fund at age 65 if you save $ 100 a month?
b) How much will be in your fund if you get a steady return of 7.5% compounded monthly?
c) How much will be in your fund if you get a steady return of 10% compounded monthly? (This is comparable to the average annual return of about 11% for all stocks on the New York Stock Exchange from 1950 to 2000) This question is from textbook For All Practical Purposes

Answer by stanbon(48551) (Show Source):
You can put this solution on YOUR website!
Suppose that you save for retirement by contributing the same amount each month from your 23rd birthday until your 65th birthday, in an account that pays a steady 5% annual interest compounded monthly.
a) How much will be in your fund at age 65 if you save $ 100 a month?
Formula for "future value of an annuity":
S = R[(1+i)^n -1]/i
S = 100[(1+(0.05/12))^(32*12) -1]/(0.05/12)
S = 100[23.3699]/0.004
S = $584,247.50
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b) How much will be in your fund if you get a steady return of 7.5% compounded monthly? Don't have a formula for this; suggest you post it separately.
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c) How much will be in your fund if you get a steady return of 10% compounded monthly? Don't have a formula for this; suggest you post it separaely.
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Cheers,
Stan H.