When he was 40 Keefer began investing $150 per month in various securities for his retirement savings. His investments averaged a 4.5% annual rate of return until he retired at age 70. What was the value of Keefer's retirement savings when he retired? Assume monthly compounding of interest.

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Mathematics

Honey Locks

15 February, 07:10

When he was 40 Keefer began investing $150 per month in various securities for his retirement savings. His investments averaged a 4.5% annual rate of return until he retired at age 70. What was the value of Keefer's retirement savings when he retired? Assume monthly compounding of interest.

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Ian Bautista · Answer 1

At retirement, Keefer will have saved for 30 (that is, 70-40) years.

Monthly saving, P = $150, Annual rate of return, R = 4.5% = 0.045.

Therefore, future value (FV) at the time of retirement will be;

FV = P*[1 + (R/12) ^12*30] / (R/12)

Substituting all the parameters;

FV = 150*[1 + (1+0.045/12) ^360] / (0.045/12) = $113.907.92