You deposit $6.8 thousand at the end of every six months for the next 7 years...

You deposit $6.8 thousand at the end of every six months for the next 7 years into an IRA account that earns 7.4% annually (compounded semiannually). How much will you have on the account after making the last deposit? Express the answer in $ thousands, round to the nearest $0.1 thousand. E.g., if your answer is $42,576, record it as 42.6.

Solutions

Expert Solution

Semi annual rate = 7.4% / 2 = 3.7%

Number of periods = 7 * 2 = 14

Future value = Annuity * [(1 + r)^n - 1] / r

Future value = 6,800 * [(1 + 0.037)^14 - 1] / 0.037

Future value = 6,800 * [1.66304 - 1] / 0.037

Future value = 6,800 * 17.919989

Future value = $121,856

You will have 121.9

jeff jeffy answered 2 years ago

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