Lynne is 25 years old and starting an IRA (individual retirement account). She is going to invest $150 at the beginning of each month. The account is expected to earn 5.5% interest, compounded monthly. How much money, rounded to the nearest dollar, will Lynne have in her IRA if she wants to retire at age 65?

Question

noname · Accepted Answer

its 262,353

Damon · Answer

40 years *12 = 480 months = n
.055/12 = .0045833333 interest rate per month = r
N = 150 per month in
amount of sinking fund
S = N [(1 + r)^n -1] /r
S = 150 [ (1.0045833333^480 -1 ) ] / 0.0045833333
= 150 [ 7.979765 ] /0.0045833333
= 150 ( 1741.04)
= 261,156