Charlie Brown, a 25-year-old professional, invests $200 a month in the XYZ Capital Opportunity Fund, which has a 10-year average return of 8.75%.Charlie wants to estimate what he will have for retirement when he Is 60 years old if the rate stays constant. Assume monthly compounding.If Charlie makes no further deposits and makes no withdrawals after age 60, how much will he have for retirement at age 65?

Answered: Charlie Brown, a 25-year-old…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter5: The Time Value Of Money

Section: Chapter Questions

Problem 10P

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Charlie Brown, a 25-year-old professional, invests $200 a month in the XYZ Capital Opportunity Fund, which has a 10-year average return of 8.75%.
1. Charlie wants to estimate what he will have for retirement when he Is 60 years old if the rate stays constant. Assume monthly compounding.
2. If Charlie makes no further deposits and makes no withdrawals after age 60, how much will he have for retirement at age 65?

Expert Solution

Step 1 Part 1

Calculation of amount Charlie will have at the completion of 60 years is shown below:

Hence, the amount he will receive at the completion of 60 years is $552,540

Formula sheet of calculation of future value is shown below:

To open the "FV function" window - MS-Excel --> Formulas --> Financials --> FV.

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