Question

Aaron contributes $3,000 annually toward an IRA. A projected annual return is 7.2%. What is the future value in 5 years?

$15,000.00
$17,321.20
$41,666.67
$108,000.00

Answer 1

FV= $17,321.20

Explanation:

Giving the following information:

Annual deposit (A)= $3,000

Number of periods (n)= 5 years

Interest rate (i)= 7.2% = 0.072

To calculate the future value (FV), we need to use the following formula:

FV= {A*[(1+i)^n-1]}/i

A= annual deposit

FV= {3,000*[(1.072^5) - 1]} / 0.072

FV= $17,321.20