Question

Part 1:

What is the total maximum allowable contribution per year in a standard IRA?
a) $5,000
b) $6,000
c) $7,000
d) $8,000

What is the total maximum allowable contribution per year in a Roth IRA?
a) $5,000
b) $6,000
c) $7,000
d) $8,000

Part 2:
3. Mike will start with $1 in his Roth IRA. He plans to make weekly payments of $100. His broker guarantees a 6% annual rate of return with compound interest. How much money will he have in his Roth IRA after 30 years?
a) $144,000
b) $196,308
c) $243,198
d) $302,683

Answer 1

Part 1:

The total maximum allowable contribution per year in a standard IRA is b. $6,000, and

it is also b. $6,000 in a Roth IRA.

Part 2:

After 30 years, Mike will have approximately c) $243,198 in his Roth IRA.

Step-by-step explanation:

The total maximum allowable contribution per year in a standard IRA is $6,000. On the other hand, the total maximum allowable contribution per year in a Roth IRA is also $6,000. These limits apply for the year 2021.

In Part 2 of the question, to calculate how much money Mike will have in his Roth IRA after 30 years, we can use the compound interest formula:

A = P(1 + r/n)^(nt), where A is the final amount, P is the principal, r is the interest rate, n is the number of times interest is compounded per year, and t is the number of years.

In this case, the principal is $1, the interest rate is 6% (or 0.06), and the number of times interest is compounded per year is 1.

Plugging these values into the formula, we get: A = 1(1 + 0.06/1)^(1*30).

Simplifying the equation, we find that Mike will have approximately $243,198 in his Roth IRA after 30 years.