Question

You have just made your first $5,000 contribution to your individual retirement account. Assume you earn an annual return 10.8 percent and make no additional contributions.

What will your account be worth when you retire in 44 years? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Account value            $

What if you wait 10 years before contributing? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Account value            $

Answer 1

Answer a - Account value = $455742.43

Answer B - Account value = $163426.27

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Answer 2

SOLUTION :

FV available on retirement after 44 years :

= Amount invested * ( 1 + r)^n 

= 5000 * (1 + 0.1080)^44

= 455742.43 ($)  (ANSWER)

If deposit of $5000 is made after 10 years from now,

FV available at retirement after 44 years :

= Amount invested * ( 1 + r)^n 

= 5000 * (1 + 0.1080)^(44 - 10)

= 163426.27 ($)  (ANSWER)