Question

Jimmy establishes a Roth IRA at age 47 and contributes 89,600 over 18 years. The account is now worth162,000. Assume that Jimmy meets the income limitation at the time of the contributions. What is the rate of return on Jimmy's Roth IRA?

1) 6%
2) 8%
3) 10%
4) 12%

Answer 1

The rate of return on Jimmy's Roth IRA is 80%.

Step-by-step explanation:

To calculate the rate of return on Jimmy's Roth IRA, we need to find the percentage increase in the account value over the contribution period. The formula to calculate the rate of return is (Ending Value - Beginning Value) / Beginning Value * 100. Substituting in the given values, we get: (162,000 - 89,600) / 89,600 * 100 = 80%. Therefore, the rate of return on Jimmy's Roth IRA is 80%, which is not one of the given options.