6. If a person starts investing $100 per month starting at age 21, and that money earns a 5% return every year, how much will this person have when turning 70 years old? For ease of calculation, assume starting balance of $0 and annual contributions of $1,200 (12*$100).

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Business

Ari Mathis

17 May, 14:04

6. If a person starts investing $100 per month starting at age 21, and that money earns a 5% return every year, how much will this person have when turning 70 years old? For ease of calculation, assume starting balance of $0 and annual contributions of $1,200 (12*$100).

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Marina Cummings · Answer 1

We can use the formula of the future value of an annuity ordinary which is;

Fv=pmt [ ((1+r) ^ (n) - 1) : r]

Fv = future value = ?

PMT = yearly payment = 1200

R = interest rate = 5% = 0.05

N = time = (70-21) = 49 years

Fv=1,200 * (((1+0.05) ^ (49) - 1) : (0.05))

Fv = 238111.995103