Edward Johnson decided to open up a superannuation fund.He will invest $1800 per year for the next 35 years by depositing $150 at the end of each month.Assume that Edward will earn 8.75% annual interest compounded monthly over the life of the fund.How much will he have at the end of 35 years?
A)$125 250
B)$250 321
C)$363 000
D)$414 405

Question

Quizplus · Accepted Answer

First, we need to find the monthly interest rate:
8.75% / 12 = 0.7292% or 0.007292

Then, we can use the formula for future value of an annuity due to find the final amount:
FV = P * (((1 + r)^n - 1) / r) * (1 + r)
Where:
P = monthly payment = $150
r = monthly interest rate = 0.007292
n = number of months = 35 years * 12 months/year = 420

FV = 150 * (((1 + 0.007292)^420 - 1) / 0.007292) * (1 + 0.007292)
FV = $414,405.38

Therefore, Edward will have approximately $414,405 at the end of 35 years, so the answer is D.

Edward Johnson Decided to Open Up a Superannuation Fund