Assume that you contribute $200 per month to a retirement plan for 15 years. Then you are able to increase the contribution to $400 per month for another 25 years. Given a 5 percent interest rate, what is the value of your retirement plan after 40 years?
A) $424,305.97
B) $24,159.95
C) $28,475.66
D) $72,479.86

Question

Quizplus · Accepted Answer

To calculate the future value of the retirement plan, we use the future value of an annuity formula for both contribution periods. For the first 15 years with $200 monthly contributions: FV = P * [((1 + r)^n - 1) / r], where P = $200, r = 0.05/12 (monthly interest rate), and n = 15*12 (number of months). For the next 25 years with $400 monthly contributions, we apply the same formula with P = $400, and n = 25*12. The total value is the sum of both periods' future values.

Assume That You Contribute $200 Per Month to a Retirement