Luis has $120,000 in his retirement account at his present company. Because he i
ID: 2646848 • Letter: L
Question
Luis has $120,000 in his retirement account at his present company. Because he is assuming a position with another company, Luis is planning to "roll over" his assets to a new account. Luis also plans to put $3000/quarter into the new account until his retirement 20 years from now. If the new account earns interest at the rate of 2.5%/year compounded quarterly, how much will Luis have in his account at the time of his retirement? Hint: Use the compound interest formula and the annuity formula. (Round your answer to the nearest cent.)
Explanation / Answer
SOLUTION:
Current Account = $120,000 (1 + (0.025 / 4)(4*20yrs)
Current Account = $197,539
The future value (FV) of the account is,
Using annuity formula.
FV = $3000 [(1 + (0.025 / 4)(4*20)
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