Question

You just graduated and landed your first job in your new career.

You remember that your favorite finance professor told you to begin the painless job of saving for retirement as soon as possible, so you decided to put away $2,000 at the end of each year in a Roth IRA.

Your expected annual rate of return on the IRA is 7.5%.

How much will you accumulate at retirement after 40 years of investing ***(note: this may assume that you are even retiring early)*** ?

which is best choice:
A). $1,088,632
B). $94,426
C). $247,921
D). $454,513

Answer 1

correct option is D). $454,513

Step-by-step explanation:

given data

Annuity = $2000

rate = 7.5 % = 0.075

time period = 40 year

solution

we get here Future value of annuity that is express as

Future value of annuity = Annuity ×
`((1+r)^t -1)/(r)` ......................1

here r is rate and t is time period so now put value and we get

Future value of annuity = $2000 ×
`((1+0.075)^(40) -1)/(0.075)`

Future value of annuity = $454513.03

so correct option is D). $454,513