If Sally Miller commits to investing in $5,000 into her IRA for 20 years. A) What...
If Sally Miller commits to investing in $5,000 into her IRA for 20 years.
A) What will be the value of her investment in 20 years if she earns a 4% interest rate?
B) If she stops investing but continues to leave her IRA funds with the bank, what will be the value of her investment in 15 more years when she plans to retire?
C) How much could she withdraw each year for the next 25 years?
Homework Answers
a.
Calculating Future Value,
FV = [PV = 0, T = 20, I = 0.04, PMT = 5,000]
FV = $148,890.39
b.
Future Value = 148,890.39(1.04)15
Future Value = $268,143.18
c.
Calculating Annual Withdrawal,
PMT = [FV = 0, PV = 268,143.18, T = 25, I = 0.04]
Annual Withdrawal = $17,164.37
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