Problem 6-25 Calculating Annuity Future Values [LO1] You are planning to make an

Question

Problem 6-25 Calculating Annuity Future Values [LO1]

You are planning to make annual deposits of $5,850 into a retirement account that pays 8 percent interest compounded monthly. How large will your account balance be in 25 years? (Do not round intermediate calculations and round your final answer to 2 decimal places, e.g., 32.16.)

You are planning to make annual deposits of $5,850 into a retirement account that pays 8 percent interest compounded monthly. How large will your account balance be in 25 years? (Do not round intermediate calculations and round your final answer to 2 decimal places, e.g., 32.16.)

Explanation / Answer

Answer: EAR= (1 + r/12)^12 - 1

EAR=(1+0.08/12)^12-1

=8.30%

Future value=PMT [((1 + i)^n - 1) / i]

=$5850[((1+0.0830)^25-1)/0.083]

=$446873.71

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