Question

Sean is trying to decide between four Roth IRAs. The month after the required initial contribution (RIC), he wants to start contributing the minimum subsequent investment (MSI) each month. Compare the cost of the minimum initial investment and Sean's monthly contribution for each IRA over the next 10 years. Which Roth IRA would Sean put the most money in over those 10 years?

Answer 1

Option C.

Explanation:

So, in the question above we are given that the value or parameters for the required initial contribution (RIC) and

the minimum subsequent investment (MSI) for each options and we are going to calculate the amount that will be gotten after investing in each options and the one that gives the highest values will be the correct option, which in this case is OPTION C.

So, we will be starting from the OPTION C, in white have that the

required initial contribution (RIC) = $5,000 and the minimum subsequent investment (MSI) = $100 for option C.

One year = 12 months

10 years = x months.

x = 10 × 12 = 120 months in ten years.

Thus, the formula for the Calculation is given below;

= 120 months × minimum subsequent investment (MSI) + required initial contribution (RIC).

= (120 months × $100) + $5,000 = $17,000.

If we Calculate for the other options with this format, we will have values for option A = $13, 000 and option B= $2,900 and the value for the investment in option D = $12,050.

$17,000 is the highest which is for option option C. Therefore, Sean should put his money in option c for better investment.