Stephanie is going to contribute $300 on the first of each month,starting today,to her retirement account.Her employer will provide a 50 percent match.In other words,her employer will contribute 50 percent of the amount Stephanie saves.If both Stephanie and her employer continue to do this and she can earn a monthly rate of 0.90 percent,how much will she have in her retirement account 35 years from now?

Question

Quizplus · Accepted Answer

We'll use the future value formula for an annuity,

FV = PMT × ((1 + r)n - 1) ÷ r

where

PMT = monthly payment = $300 + 0.5($300) = $450
r = monthly interest rate = 0.90% ÷ 100% ÷ 12 = 0.0075
n = number of months = 35 years × 12 months/year = 420

Substituting these values, we get

FV = $450 × ((1 + 0.0075)^420 - 1) ÷ 0.0075
   = $2,123,007.15

Therefore, Stephanie will have $2,123,007 in her retirement account 35 years from now.

The answer is (E).

Stephanie Is Going to Contribute $300 on the First of Each