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# A retirement account has \$10,000 in it and earns 10% interest per year compounded monthly. At the end of every month for the next 5 years you will deposit \$200

A retirement account has \$10,000 in it and earns 10% interest per year compounded monthly. At the end of every month for the next 5 years you will deposit \$200 into this account. How much will be in the account at the end of 5 years?

### 1 Answer by Expert Tutors

Brian D. | Accounting and Related Subjects Tutor - Patient, Flexible, EffectiveAccounting and Related Subjects Tutor - ...
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Bri:

This can be solved using the Excel function for future value (=FV(rate,nper,pmt,[pv],[type])), where:
rate (interest rate per period) = 10%/year / 12 months/year = 0.833%, or 0.00833,
nper (number of periods) = 5 years / 12 months/year = 60,
pmt (payment per period) = -\$200 (entered as a negative because it represents a cash outflow),
pv (present value) = \$10,000 (entered as a negative because it represents a cash outflow), and
type (1 = annuity due (payment at the beginning of the period) or 0/null = ordinary annuity (payment at the end of the period) = 0; therefore,
fv (future value) = \$31,935.60.

I hope that helps. Please contact me with any questions.

Regards,

Brian