As a fringe benefit for the past 8 years, Colin's employer has contributed $50 at the end of each month into an employee retirement account for Colin that pays interest at the rate of 8%/year compounded monthly. Colin has also contributed $2,000 at the end of each of the last 4 years into an IRA that pays interest at the rate of 10%/year compounded yearly. How much does Colin have in his retirement fund at this time?

Question

As a fringe benefit for the past 8 years, Colin's employer has contributed $50 at the end of each month into an employee retirement account for Colin that pays interest at the rate of 8%/year compounded monthly. Colin has also contributed $2,000 at the end of each of the last 4 years into an IRA that pays interest at the rate of 10%/year compounded yearly. How much does Colin have in his retirement fund at this time?
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Thank you

Reiny · Accepted Answer

amount of 1st part:
i = .08/12 = .006666..
n = 96
paym = 50
amount = 50( 1.0066..^96 - 1)/.00666..
= $6693.43

amount of 2nd part:
i = .10
n = 4
paym = 2000
amount = 2000(1.1^4 - 1)/.1 = $9282.00

total amount = $6693.43 + $9282.00
= $15,975.43

Looks like Colin is not yet ready to retire.

Yelena · Answer

What about the total interest of every year