Question

Suppose that you deposit $200 each month into a retirement account earning 6% interest for years, and then stop making and leave the money earning interest for another 20 years. How much will you end up with? How much did you contribute?

Answer 1

First we should use the formula for the future value of the annuity:

$FVa = \frac{200×((1 + 0.06)^n - 1)}{0.06},$

but the number of years n is not provided.

Then we should use the formula for the future value using compound interest:

$FV = FVa×(1 + 0.06)^{20} .$