Final answer:
Stephen deposited a total of $320,000 into his retirement account by making quarterly payments of $5333.33 for 15 years. The total interest earned on his deposits was $193,144.49, calculated by subtracting the total deposits from the final account balance of $513,144.49.
Step-by-step explanation:
The question involves calculating the total deposits made by Stephen into his retirement account and the amount of interest earned over a period of time. To calculate these values, we must understand the concepts of regular deposits and compound interest.
Calculating the Total Deposits
Stephen deposited $5333.33 every quarter from age 50 to age 65. Since a quarter is 3 months long, there are four quarters in a year. Therefore, he made deposits for 15 years, which is equivalent to 15 x 4 = 60 quarters.
Total deposits = Number of deposits × Deposit amount per quarter
Total deposits = 60 × $5333.33
Total deposits = $320,000.
Calculating the Interest Earned
To calculate the interest earned, we take the final account value and subtract the total deposits from it.
Interest earned = Final account balance - Total deposits
Interest earned = $513,144.49 - $320,000
Interest earned = $193,144.49.
Through this exercise, it's clear that making regular deposits into a retirement account and allowing the power of compound interest to work can significantly increase the value of savings over time.