Joanna has been saving for retirement for 40 years. She made monthly deposits of\$275 and earned 5.6% annual interest, compounded monthly. According to her account documents, after these 40 years, she has a balance of \$491,730.35 in her account. How much of this did Joanna contribute and how much of this is interest?

Solution

J o anna ha s b ee n s a v in g f or re t i re m e n t f or 40 ye a rs . S h e ma d e m o n t h l y d e p os i t s o f $275 an d e a r n e d 5.6% ann u a l in t eres t, co m p o u n d e d m o n t h l y . A ccor d in g t o h er a cco u n t d oc u m e n t s, a f t er t h ese 40 ye a rs, s h e ha s a ba l an ce o f $491, 730.35 in h er a cco u n t . Ho w m u c h o f t hi s d i d J o anna co n t r ib u t e an d h o w m u c h o f t hi s i s in t eres t ?

Interest : 491455.35

Solution steps

Translate the problem into an equation:

491730.35 = 275 + I

Solve for

I, 491730.35 = 275 + I : I = 491455.35

Interest : 491455.35