Mr. Sparky puts away $250 from each monthly paycheck into an account that returns 7.89% annual interest compounded monthly for his retirement.

How much will Mr. Sparky have saved up in his account if he makes these deposits for 20 years?

When he retires, he plans to live on the interest he earns each month. How much in interest will he earn each month? (assume he can get the same interest rate as in part a)

Question

Mr. Sparky puts away $250 from each monthly paycheck into an account that returns 7.89% annual interest compounded monthly for his retirement.

How much will Mr. Sparky have saved up in his account if he makes these deposits for 20 years?


When he retires, he plans to live on the interest he earns each month. How much in interest will he earn each month? (assume he can get the same interest rate as in part a)

anonymous · Answer

I got 145,258.3326 for part a

tkhunny · Answer

Unfortunately, the problem statement appears to be silent on the issue of Beginning or Ending of each month,  You have answered well for End of Month.  Not so much if Beginning of Month is intended.

tkhunny · Answer

Have you considered 145258.33 * 0.0789/12?

anonymous · Answer

to find the interest?

tkhunny · Answer

Restate:

To find the monthly interest at retirement, have you considered 145258.33 * 0.0789/12?

anonymous · Answer

no

tkhunny · Answer

Well, there you go.

anonymous · Answer

why not consider 0.0789 as EAR then monthly interest rate be 0.0063? @tkhunny

tkhunny · Answer

@doodal I suppose the language shown could mean that, but that was neither my understanding of the problem language, nor mvesling's.  Also, that is far too few decimal places to be helpful.

"7.89% Annual Interest, Compounded Monthly" suggests a monthly rate of 0.0789/12 = 0.006575 and an effective annual rate of $(1.006575)^{12}$ which gives 8.181669%

anonymous · Answer

hm.