SOLUTION: Future Value of an Annuity: I invest $50 a month in a 401k. Assuming an annual rate of return of 9%, how much will this fund be worth if retiring in 40 years? My problem in try

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Question 754985: Future Value of an Annuity:
I invest $50 a month in a 401k. Assuming an annual rate of return of 9%, how much will this fund be worth if retiring in 40 years?
My problem in trying to figure this out is dividing the 9% rate out monthly.
Answer by MathTherapy(10556) About Me  (Show Source):
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I invest $50 a month in a 401k. Assuming an annual rate of return of 9%, how much will this fund be worth if retiring in 40 years?
My problem in trying to figure this out is dividing the 9% rate out monthly.

The easiest method is to apply the formula for the future value of an ordinary annuity, which is: highlight%28FV%5Boa%5D+=+PMT%28%281+%2B+i%2Fm%29%5Emt+-+1%29%2F%28i%2Fm%29%29%29, with:
FV%5Bao%5D being future value of an ordinary annuity

PMT being payment, which in this case is $50

i being interest rate, or .09 in this case

m being the amount of compounding periods, per year (12 in this case since payments would be monthly)

t being time, in years (40 in this case)

With that you'll have a total of $highlight_green%28234066.01%29 in 40 years.