You have just made your first $5,000 contribution to your individual retirement account.

Calculating Future Value:

You have just made your first $5,000 contribution to your individual retirement account. Assuming you earn a 10.1 percent rate of return and make no additional contributions, what will your account be worth when your retire in 45 years? What if you wait 10 years before contributing?

Expert Solution

There are two future time period that have to be consider for this question. In order to solve this problem we have to find the future values of the account. This means that the present value and the rate of return is important to know.

Future value can be found with the following formula:

FV = PV(1+r)^t

FV for the 45 years

FV = $5,000 (1+.101)⁴⁵

FV = $5,000 (1.101)⁴⁵

FV= $379,663.947

FV for the 35 years (wait 10 years to invest in account)

FV= $5,000 (1+.101)³⁵

FV= $5,000 (1.101)³⁵

FV= $145,052.82

The account would be worth $379,663.947 in 45 years at 10.1% rate of return. If you wait 10 years to contribute, the account will be worth $145,052.82 in 35 years.

Heidi Singh answered 2 years ago

You have just made your first $5,700 contribution to your retirement account. Assuming you earn an...

You have just made your first $5,700 contribution to your retirement account. Assuming you earn an 13 percent rate of return and make no additional contributions, your retirement account will be worth $592,728 when you retire in 38 years. What will your account be worth at retirement if you had waited 7 years before making the $5,700 contribution? (Round time value factors to 6 decimal places and final answer to the nearest dollar amount)

You just made your first $18,500 contribution to your retirement account. Assuming you earn 9% and...

You just made your first $18,500 contribution to your retirement account. Assuming you earn 9% and make no additional contributions, what will your account be worth when you retire in 45 years? Using Excel Functions

You are starting to save for retirement and just made your first $1,000 contribution to your...

You are starting to save for retirement and just made your first $1,000 contribution to your retirement account. Assume you earn an 8% rate of return and make no additional contributions. What will your account be worth when you retire in 30 years?

1 ) Tim plans to fund his individual retirement account (IRA) with the maximum contribution of...

1 ) Tim plans to fund his individual retirement account (IRA) with the maximum contribution of $2,000 at the end of each year for the next 20 years. If tim can earn 12 percent on his contributions, how much will he have at the end of the twentieth year? 2) The present value of an ordinary annuity of $2,350 each year for eight years, assuming an opportunity cost of 11 percent, is ? 3) The future value of an ordinary...

Assume that you have 40 years until retirement and have just started your first job. Once...

Assume that you have 40 years until retirement and have just started your first job. Once you retire, you anticipate that you will live for 30 additional years. Assume that you will require $100,000 per year to support yourself in retirement. All investments that you make will go into and stay an account that returns 7.8% per year (however much you have at retirement will sit that account and continue to accrue interest on the remaining balance. How much will...

You have just started a new job that offers a retirement savings account. You have two...

You have just started a new job that offers a retirement savings account. You have two options: You can invest 5% of your monthly wages at 2% OR You can invest 4% of your monthly wages at 4%. Both are compounded monthly. b. Assume that you will always make $45,000 annually, how much will you have saved with the better plan after 15 years? c.Assume that you will always make $45,000 annually, how much will you have saved with the...

5-19. Suppose your parents have just retired and have $1 millionin a retirement account. For...

5-19. Suppose your parents have just retired and have $1 million in a retirement account. For how many years can they withdraw $5,000 at the beginning of each month for expenses, assuming that the account will continue to earn a 5 percent annual return until it is exhausted?See Problem 5-19. Now, suppose your parents have decided that they will depend on their retirement savings for 20 years. Everything else remains the same. How much money can they afford to withdraw...

First, I want you to think about your retirement portfolio, and make a contribution to discussion...

First, I want you to think about your retirement portfolio, and make a contribution to discussion based on the following questions: Is it easy or difficult to estimate the risk of your overall portfolio? Have you calculated the standard deviation of your investment portfolio? Without giving details of your exact allocation, do you own now more stocks than bonds? How frequent do you adjust (rebalance) your portfolio? If you were going to make some changes now, do you think you...

You decide to open an individual retirement account (IRA) at your local bank that pays 8...

You decide to open an individual retirement account (IRA) at your local bank that pays 8 %/year compounded annually. At the end of each of the next 40 years, you will deposit $4,000 into the account. Three years after your last deposit, you will begin making annual withdrawals. What annual amount will you be able to withdraw if you want the withdrawals to last: A, 20 years? $ B, 30 year? $ C, Forever? $

Your friend currently has $20,000 in an IRA (Individual Retirement Account) and estimate that it will...

Your friend currently has $20,000 in an IRA (Individual Retirement Account) and estimate that it will earn 6%/year. She is now 30 years old and plans to retire when she is 65 years old. If she wants $1,000,000 in the account in 35 years, how much more does she have to deposit every year to have the $1,000,000 total?

Question