Question

Josie has just become eligible to participate in her company’s retirement plan; she is excited as her company matches her contributions dollar for dollar in this plan. The plan averages an annual return of 7% interest compounded monthly. Josie is 35 years old and plans to retire at age 65. She receives her pay at the beginning of each month and contributes 10% of her gross monthly salary of $2,500 into her retirement plan. What is the total amount that she will have when she retires?

a) $613,544

b) $306,772

c) $609,986

d) $304,993

e) $622,765

Answer 1

Amount every month (PMT) = 10% * 2500 = 250

Rate = 7%/12

Number of years (nper) = 30* 12 = 360 periods

Amount at retirement (FV) =
=Fv 7%/12,360,250,,1) FV(rate, nper, pmt, [pv], [type])
= $ 306,771.87

Answer is b) $306,772