Question

Question 9 (0.15 points) You save $600 a year into a 401(k) account that you invest in a mutual fund earning 8% per year. You plan to retire in 25 years. How much money will you have in your account at retirement? Your Answer: Answer

Answer 1

We can find the answer using future value of annuity formula:

$\textup{FVA} = A\left [ \frac{(1+i)^{n}-1}{i} \right ]$

Where,
FVA = Future Value of Annuity
A = Annuity or payment per year
i = rate of interest in decimal
n = number of years

Substituting the values in the formula, we get:

$\textup{FVA} = 600\left [ \frac{(1+0.08)^{25}-1}{0.08} \right ]$

$= 600\left [ \frac{5.848475196}{0.08} \right ]$

$=\textup{\$43,863.56 }$

Therefore, the amount in your retirement account after 25 years will be $43,863.56.