(Future value of an annuity)Upon graduating from college 35 years ago, Dr. Nick
ID: 2809301 • Letter: #
Question
(Future value of an annuity)Upon graduating from college
35
years ago, Dr. Nick Riviera was already planning for his retirement. Since then, he has made deposits into a retirement fund on a
quarterly
basis in the amount of
$250
Nick has just completed his final payment and is at last ready to retire. His retirement fund has earned
11
percent compounded
quarterly
Use five decimal places for the periodic interest rate in your calculations.
a.How much has Nick accumulated in his retirement account?
b. In addition to this,
15
years ago Nick received an inheritance check for
$25,000
from his beloved uncle. He decided to deposit the entire amount into his retirement fund. What is his current balance in the fund?
Explanation / Answer
a) Rate per quarter = 11%/4
Number of Years = 35 * 4 = 140
PMT = 250
retirement fund = 250 * ((1+r)n-1)/r = 250 * ((1+11%/4)140-1)/11%/4 = 396477.00729 or 396477.01
b)Inheritence check = 25000
Retirement fund due to inheritence check = 25000*(1+11%/4)15* 4 = 127306.28401 or 127306.28
Total retirement fund = 396477.00729 + 127306.28401 =523783.29131 or 523783.29
Best of Luck. God Bless
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