Question

use the savings plan formula to answer the following question. a friend had an IRA with an APR of 6.75% she started the IRA at age 20 and deposits $95 per month. how much will her IRA contain when she retires at age 65? compare that amount to the total deposits made over the time period. after retirement the IRA will contain $____________

Answer 1

The IRA will contain approximately $377,294.57 when your friend retires at age 65.

Step-by-step explanation:

To calculate the amount that the IRA will contain when your friend retires at age 65, we can use the formula for compound interest:

Final amount = P(1 + r/n)^(nt)

Where:

• P is the monthly deposit ($95)
• r is the annual interest rate (6.75% or 0.0675)
• n is the number of times interest is compounded per year (12, since it's compounded monthly)
• t is the number of years (65 - 20 = 45)

By substituting the values into the formula, we can calculate the final amount of the IRA when your friend retires. After retirement, the IRA will contain approximately $377,294.57