Asked by Briana Goins on May 10, 2024
Verified
Cecile is 23 years old and wants to retire when she is 55.She opens up a retirement account and makes a $400 deposit each month.If the account pays 2.75% interest compounded monthly,she will have about $245,842.67 in her account when she is 55.
Retirement Account
A financial account designed for saving funds specifically for the period of life when an individual stops working.
Compounded Monthly
Compounding monthly refers to the addition of interest to the principal sum of a loan or deposit, calculated on a monthly basis, which results in earning interest on interest.
- Estimate the growth of investment funds over time, considering both the influence of compounding interest rates and ongoing contributions.
Verified Answer
SA
Stephanie AbernathyMay 13, 2024
Final Answer :
True
Explanation :
We can use the formula A=P*(1+r/n)^(nt) where A is the final amount, P is the principal (initial deposit), r is the interest rate, n is the number of times interest is compounded per year, and t is the number of years. Plugging in the given values, we get:
A = 400*(1+(0.0275/12))^(12*(55-23))
A = $245,842.67
Therefore, the statement is true.
A = 400*(1+(0.0275/12))^(12*(55-23))
A = $245,842.67
Therefore, the statement is true.
Learning Objectives
- Estimate the growth of investment funds over time, considering both the influence of compounding interest rates and ongoing contributions.