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Mr
Mr. Nowak has contributed $233.00 at the end of each month into an RRSP paying 3% per annum compounded annually.
How much will Mr. Nowak have in the RRSP after 20 years?
(Round the final answer to the nearest cent as needed. Round all intermediate values to six decimal places as needed.)
How much of the above amount is interest?
Expert Solution
Computation of the future value:-
Future value = Payment*(((1+rate)^n-1)/rate)
Here,
Rate = 3%/12 = 0.25% (monthly)
n = 20*12 = 240 periods (monthly)
FV = $233*(((1+0.25%)^240-1)/0.25%)
= $233*328.301998
= $76,494.37
Computation of the amount of interest:-
Amount of interest = Future value - Total payments
= $76,494.37 - ($233*20*12)
= $76,494.37 - $55,920
= $20,574.37
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