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Claire Fitch is planning to begin an individual retirement program in which she will invest $1,500 at the end of each year. Fitch plans to retire after making 30 annual investments in the program earning a return of 10%. What is the value of the program on the date of the last payment (30 years from present)?

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beritop1089

Answer:

$246,741.03

Explanation:

This is an ordinary annuity(payments occur at the end of each year). The question is basically asking for it's future value. Using a financial calculator, input the following;

Total duration; N = 30

Interest rate; I/Y = 10%

Recurring payment; PMT = -1,500

One time payment ; PV = 0

then compute future value; CPT FV = 246,741.03

Therefore; the value of the program on the date of the last payment will be $246,741.03

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