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8 June, 08:15

To save for retirement, a student invests $60 each month in an ordinary annuity with 6 % interest compounded monthly. Determine the accumulated amount in the student's annuity after 35 years.

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  1. 8 June, 08:44
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    The student invests $60 each month and the interest rate is 6%. The interest rate is compounded monthly so we will take the interest rate as 0.5% (6/12).

    The number of periods will be 420 (35*12) as the payments are made every month.

    The present value is 0 as he is not making any investment at the start.

    We need to find the future value of these payments, and for that we need to put these values in a financial calculator

    PV = 0

    PMT = 60

    I = 0.5

    N=420

    Compute FV

    FV=85,482

    The total accumulated amount in the students annuity will be $85,482.
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