You begin working at age 25, and your employer deposits $340 each month into a retirement account that pays an APR of 6% compounded monthly.

Question

Make a table that shows the size of your nest egg in terms of the age at which you retire. Include retirement ages from 60 to 70. (Round your answers to the nearest cent.) As you can see, all my answers were wrong. 

Age Nest egg
60 $ 11959.5
Incorrect: Your answer is incorrect.
61 $ 12301.2
Incorrect: Your answer is incorrect.
62 $ 12642.9
Incorrect: Your answer is incorrect.
63 $ 12984.6
Incorrect: Your answer is incorrect.
64 $ 13326.3
Incorrect: Your answer is incorrect.
65 $ 13668
Incorrect: Your answer is incorrect.
66 $ 14009.7
Incorrect: Your answer is incorrect.
67 $ 14351.4
Incorrect: Your answer is incorrect.
68 $ 14693.1
Incorrect: Your answer is incorrect.
69 $ 15034.8
Incorrect: Your answer is incorrect.
70 $ 15376.5
Incorrect: Your answer is incorrect.

Answer 1

Future value of a series of payments P for n periods at interest rate n:

FV = P * [(1+i)ⁿ - 1] / i

 

P = 340

At age 60, it will have been contributed to for (60-25)*12 = 420 months

The monthly interest rate is 0.06/12 = 0.005

 

FV₆₀ = 340 * [(1.005)⁴²⁰ - 1] / 0.005 = $484,401.50

 

Each year will add 12 months/payments, so n will increase by 12.

FV₆₁ = 340 * [(1.005)⁴³² - 1] / 0.005

and so on.