Question

Barbara Jones is a sales executive at a Baltimore firm. She is 25 years old and plans to invest $4,000 each year in an IRA account until she is 65 at which time she will retire (a total of 40 payments). If Barbara invests at the beginning of each year, and the IRA investment will earn 9.95 percent annually, how much will she have when she retires? Assume that she makes the first payment today. (Round factor values to 4 decimal places, e.g. 1.5212 and final answer to 2 decimal places, e.g. 15.25.)

How you would put this problem into a financial calculator? Thanks

Answer 1

Formula to find Future value of an annuity paid in beginning of each year =

Where c is the periodic payment

i is the interest rate

n is the number of years

in our question

c= 4000$

i= 9.95 %

n - 40 years

FV= 4000*(1.0995^40 - 1)*(1.0995) / 0.0995 = 1920251.3141

BA II Plus Calculator Steps :

Follow the Same order in BA II Calculator

set calculator to begin mode

=> 2ND -> BGN

=> 2ND -> SET

=> 2ND -> QUIT (Cpt)

Now set

p/y i.e. payments/Years i.e 1 in our que

c/y i.e. Compounding Periods/ Years i.e 1 in our ques

=> 2ND -> p/y -> 1 -> ENTER -> Down Arrow "↓" -> 1 -> Enter -> 2ND -> QUIT

=> 40 -> N

=> 9.95 -> i/y

=> 0 -> pv

=> -4000 -> pmt

=> CPT -> FV

Ans= 1920251.3141