Question

Sara Sharp, a 30-year-old insurance broker, decided to start a retirement plan. She figures that her income for the next 20 years will be sufficient to deposit $300 at the end of each month into her retirement plan. She will then let the money sit for another 10 years until she is 60 years old. If Sarah’s retirement plan earns 5.75% compounded monthly, what amount will she have when she turns 60?

Answer 1

Please refer to below spreadsheet for calculation and answer. Cell reference also provided.

A В C D 1 APR 2 5.75% Monthly interest rate 3 0.4792% 4 Monthly deposit No. of deposit in 20 years $300.00 6 240 7 Retirement plan value at end of 20th year $134,579.33 8 9 Months in 10 years 10 120 11 Retirement plan value at end of 30th year, when she turns 60 $238,836.84 12 13 14 Ln

Cell reference -

A B C 1 APR 0.0575 2 =C2/12 Monthly interest rate 4 Monthly deposit No. of deposit in 20 years 300 -20*12 6 7 Retirement plan value at end of 20th year =FV(C3,C6,-C5,0) 9 Months in 10 years - 10*12 10 11 Retirement plan value at end of 30th year, when she turns 60 =FV(C3,C10, C8,0) 12 13 14 15 LC LC OC Lr

Hope this will help, please do comment if you need any further explanation. Your feedback would be highly appreciated.