Question

You have just made your first $5,000 contribution to your individual retirement account. Assume you earn an annual return of 10.65 percent and make no additional contributions.

Required:
a. What will your account be worth when you retire in 42 years?
b. What if you wait 10 years before contributing?

Answer 1

Results are below.

Step-by-step explanation:

Giving the following information:

Initial investment= $5,000

i= 10.65%

To determine future value, we need to use the following formula:

FV= PV(1+i)^n

For 42 years:

FV= 5,000*(1.1065^42)

FV= $350,695

Now, for 32 years:

FV= 5,000*(1.1065^32)

FV= $127,472.17