Final answer:
To calculate the total amount you will have when you retire, you need to calculate the future value of each retirement account. The future value of Account A is approximately $717,141.59 and the future value of Account B is approximately $228,149.58. Therefore, the total amount you will have when you retire is approximately $945,291.17.
Step-by-step explanation:
To calculate how much money you will have when you retire, you need to calculate the future value of each retirement account. For Account A, you will be depositing $1,400 per month for 25 years at an interest rate of 6% compounded monthly. For Account B, you will be depositing $3,000 per year for 25 years at an interest rate of 10% compounded annually.
Using the formula for future value with compound interest, the future value of Account A can be calculated as:
FV = P(1 + r/n)^(nt)
Where:
- FV = Future Value
- P = Principal (initial amount)
- r = Annual interest rate (expressed as a decimal)
- n = Number of times interest is compounded per year
- t = Number of years
Plugging in the values for Account A: P = $12,000, r = 0.06/12, n = 12, and t = 25, the future value of Account A is approximately $717,141.59.
The future value of Account B can be calculated as:
FV = P(1 + r)^t
Plugging in the values for Account B: P = $0 (initial amount), r = 0.10, and t = 25, the future value of Account B is approximately $228,149.58.
To find the total amount you will have when you retire, you simply add the future values of both accounts together:
Total Future Value = Future Value of Account A + Future Value of Account B
Therefore, the total amount you will have when you retire is approximately $945,291.17.