Question

You make $6,000 annual deposits into a retirement account that pays 9.5 percent interest compounded monthly. How large will your account balance be in 35 years? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

a. $1,354,897.69
b. $2,456,789.12
c. $850,234.56
d. $5,678,901.23

Answer 1

To calculate the account balance in 35 years with annual deposits and compound interest, use the formula for compound interest.

Step-by-step explanation:

To calculate the account balance in 35 years, we can use the formula for compound interest:

A = P(1 + r/n)^(nt)

where A is the future value, P is the principal amount (annual deposit), r is the annual interest rate, n is the number of times the interest is compounded per year, and t is the number of years.

In this case, P = $6,000, r = 9.5%, n = 12 (compounded monthly), and t = 35 years.

Plugging in these values into the formula:

A = $6,000(1 + 0.095/12)^(12*35)

Calculating this expression gives us an account balance of $1,354,897.69 rounded to 2 decimal places.