Final answer:
To determine what the retirement account will be worth after 5 years with an initial contribution of $4,500 and a 10.55% annual return, use the compound interest formula. It involves no additional contributions and annual compounding.
Step-by-step explanation:
The question involves calculating the future value of a single lump-sum investment using the formula for compound interest. Since you have made an initial contribution of $4,500 to an individual retirement account and expect an annual return of 10.55 percent, with no additional contributions, you can calculate the value of your account after 5 years using the compound interest formula:
A = P(1 + r/n)^(nt)
Where:
- A is the future value of the investment/loan, including interest
- P is the principal investment amount ($4,500)
- r is the annual interest rate (decimal) (10.55% or 0.1055)
- n is the number of times that interest is compounded per year (in this case, we'll assume it's compounded annually, so n=1)
- t is the time the money is invested, in years (5 years)
Substituting the values we get:
A = $4,500(1 + 0.1055/1)^(1*5)
After the calculation, we find the future value A, which will indicate the value of the retirement account after 5 years.