Question

(a) Patty Stacey deposits $1600 at the end of each of 5 years in an IRA. If she leaves the money that has accumulated in the IRA account for 25 additional years, how much is in her account at the end of the 30-year period? Assume an interest rate of 11%, compounded annually. (Round your answer to the nearest cent.)
$

(b) Suppose that Patty's husband delays starting an IRA for the first 10 years he works but then makes $1600 deposits at the end of each of the next 15 years. If the interest rate is 11%, compounded annually, and if he leaves the money in his account for 5 additional years, how much will be in his account at the end of the 30-year period? (Round your answer to the nearest cent.)
$

(c) Does Patty or her husband have more IRA money?

Answer 1

a)
Calculation acctumulated value at the end of 5 year:

Rate = 11%
Nper = 5
PMT = $1600
PV = 0

Accumulated value can be calculated by using the following excel formula:
=FV(rate,nper,pmt,pv)
=FV(11%,5,-1600,0)
= $9,964.48

Calculation of acctumulated value at the end of 30 year:

Rate = 11%
Nper = 25
PMT = 0
PV = $9,964.48

Accumulated value can be calculated by using the following excel formula:
=FV(rate,nper,pmt,pv)
=FV(11%,25,0,-9964.48)
= $135,372.11

Acctumulated value at the end of 30 year = $135,372.11

b)
Calculation acctumulated value at the end of 25 year:

Rate = 11%
Nper = 15
PMT = $1600
PV = 0

Accumulated value can be calculated by using the following excel formula:
=FV(rate,nper,pmt,pv)
=FV(11%,15,-1600,0)
= $55,048.57

Calculation of acctumulated value at the end of 30 year:

Rate = 11%
Nper = 5
PMT = 0
PV = $55,048.57

Accumulated value can be calculated by using the following excel formula:
=FV(rate,nper,pmt,pv)
=FV(11%,5,0,-55048.57)
= $92,760.05

Acctumulated value at the end of 30 year = $92,760.05

c)
Patty have more IRA money