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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Raquel Cherry

4 February, 06:22

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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Alia Walker · Answer 1

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.