Question

You have just made your first $5,500 contribution to your retirement account. Assume you earn a return of 10 percent per year and make no additional contributions. a.What will your account be worth when you retire in 45 years

Answer 1

$400,897.66

Step-by-step explanation:

Assuming that no further contributions will be made and that interest is compounded annually, the expression that describes the future value of a principal amount 'P', deposited at an annual rate 'r', for a period of 'n' years is:

`FV = P*(1+r)^n`

For a 45-year $5,500 investment at a rate of 10% per year, the future value is:

`FV = 5,500*(1+0.10)^45\\FV=\$400,897.66`

The account will be worth $400,897.66 when you retire.