Upon graduating from college 40 years ago, Dr. Nick Riviera was already thinking of retirement. Since then he has made deposits into his retirement fund on a monthly basis in the amount of $130. Nick has just completed his final payment and is at last ready to retire. His retirement fund has earned 6.3% interest compounded monthly.
a. How much has Nick accumulated in his retirement account?
b. In addition to all this, 10 years ago, Nick received an inheritance check for $20000 from his beloved uncle. He decided to deposit the entire amount into his retirement fund. What is his current balance in the fund?
Answer (a)
Monthly deposit = $130
Number of months = 40 * 12 = 480
Monthly interest rate = 6.3% /12
Amount Nick accumulated in his retirement account = FV(rate, nper, pmt, pv, type)
= FV (6.3%/12, 480, -130, 0, 0)
= $280,971.79
Amount Nick accumulated in his retirement account = $280,971.79
Answer (b)
Amount deposited = PV = $20,000
Number of months = 10 * 12 = 120
Monthly interest rate = 6.3% /12
Current balance in the fund = FV = PV * (1 + Periodic interest rate) ^Number of periods
= 20000 * (1 + 6.30%/12) ^120
= $37,490.38
Current balance in the fund = $37,490.38
Upon graduating from college 40 years ago, Dr. Nick Riviera was already thinking of retirement. Since...
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