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Asked 1/25/2012
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Help Tim paid $250 per month into his 401K retirement plan. After 30 years, he had accumulated $500,000. What
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Answer 1/1 - Submitted 1/27/2012
The excel formula is really quite simple! You just need your inputs.
You are making monthly deposits for 30 years so your NPER is 30 years times 12 months = 360 You are making payments of $250, so your PMT = -$250. It is negative because in theory it is "money out", not "money in"
You are starting with $0, so PV = $0
You want to end with $500,000 so your FV = $500,000
The payments will be made at the end of each period, so your "TYPE" is 0.
Using the excel function for RATE, your just need to plug in =RATE(360,-250,0,500000,0).
You will get a rate of .79%, which is per month (since that's how we calculated it). Multiply by 12 to annualize it and you get 0.09422 or 9.42%
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