Question

You have just made your first $2,000 contribution to your retirement account. Assume you earn a return of10 percent and make no additional contributions.

a. What will your account be worth when you retire in 30 years?
b. What will your account be worth if you wait 5 years before contributing?

Answer 1

BELOW

Explanation:

Assuming no compounding

then interest = prt = 2000 * .1 * 30 = 6000

add original deposit to get 8000 total at end of 30 years

Assuming annual compounding

amount = 2000 ( 1+ .1)^30 = 34 898.80 dollars

Which definitely shows the POWER of COMPOUNDING !