Morgan has decided to make contributions of $250 to her Retirement Savings Plan (RSP) at the end of each month for 30 years. She anticipates that her RSP will earn 12.75% compounded monthly. She is 20 years old now and therefore he will be only 50 when this plan is completed. How much money will be in her RSP when she is 50 years of age?
A) $284,671
B) $641,893
C) $962,357
D) $1,033,348
E) $2,763,932

Question

Quizplus · Accepted Answer

To find the future value of Morgan's Retirement Savings Plan (RSP), we use the future value of an annuity formula: $FV = P \times \frac{(1 + r)^n - 1}{r}$, where $P$ is the payment amount per period, $r$ is the interest rate per period, and $n$ is the total number of payments. Given that Morgan contributes $250 at the end of each month for 30 years, with an annual interest rate of 12.75% compounded monthly, we first convert the annual rate to a monthly rate by dividing by 12, and the number of years to months by multiplying by 12. Thus, $r = \frac{12.75\%}{12} = 0.010625$ and $n = 30 \times 12 = 360$. Plugging these values into the formula gives us the future value of Morgan's RSP when she is 50. Calculating with these inputs gives a result close to $1,033,348, making option D the correct answer.

Morgan Has Decided to Make Contributions of $250 to Her