Question

Your finance professor is constantly harping on at you to start a retirement account. As a result, you have just made your first $5,400 contribution to your company's retirement plan. Assume you earn an annual return of 13 percent and make no additional contributions to the plan.

  

	2 part question What will your retirement plan be worth when you retire in 41 years? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
	What will your retirement plan be worth if you choose to defer contributions by 10 years (i.e., wait 10 years before making your first contribution)? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Answer 1

We use the formula:  
A=P(1+r/100)^n
where   
A=future value
P=present value  
r=rate of interest
n=time period.

a.A=5400*(1.13)^41

=5400*150.043153

=$810233.03(Approx)

b.A=5400*(1.13)^31

=5400*44.2009647

=$238685.21(Approx)