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Assume that you contribute $330 per month to a retirement plan for 15 years Then you are able to increase the contribution to $530 per month for the next 25 years. Given an 8% interest rate, what is the value of your retirement plan after the 40 years? (Do not round intermediate calculations and round your final answer to 2 decimal places)

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Answer:

Total FV= $1,284,234.68

Explanation:

Giving the following information:

First part:

Monthly deposit= $330 per month

Number of periods= 15*12= 180

Second part:

Monthly deposit= $530 per month

Number of periods= 25*12= 300

Interest rate= 0.08/12= 0.0067

First, we will calculate the future value of the first part:

FV= {A*[(1+i)^n-1]}/i

A= monthly deposit

FV= {330*[(1.0067^180) - 1]} / 0.0067

FV= $114,598.17

Now, for 15 years:

FV= PV*(1+i)^n

FV= 114,598.17*(1.0067^300)

FV= 776,901.77

Finally, the future value of the second part:

FV= {530*[(1.0067^300) - 1]} / 0.0067

FV= 507,332.91

Total FV= 776,901.77 + 507,332.91

Total FV= $1,284,234.68

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