Question

QUESTION 7 Carlos plans to make regular savings contributions of $7,900 per year to his retirement account. His first regular contribution to his retirement account is expected later today and his last regular contribution is expected in 6 years. In addition, he also plans to make a one time, special contribution of $21,000 to his retirement account in 2 years from today. Carlos expects to earn 12.6 percent per year in his retirement account and he plans to retire in 7 years. How much money does Carlos expect to have in his account when he retires? $139,613 (plus or minus $10) $112,420 (plus or minus 510) $129,431 (plus or minus 510) $119,201 (plus or minus $10) None of the above is within $10 of the correct answer

Answer 1

IF ANY QUERY, FEEL FREE TO ASK IN COMMENTS Solution Future Value regular contribution formula Future Value single contribution formula FV(interest rate,period, -contribution,0,1) FV(interest rate,period,0,-contribution,1) a Future value of saving contribution 7900 Future Value Formula $91,419.74 =FV(12.6%,7,-7900,0,1) b Future value of special contribution 21000 for 5 year (7-2) Future Value Formula $38,011.17 =FV(12.6%,5,0,-21000,1) c Amount in account on retirement Amount = Future value of saving contribution 7900 + Future value of special contribution 21000 $91,419.74 + $38,011.17 $129,431 Hence, 3rd option $129,431 (plus or minus $10) is correct.