Question

In: Finance

Meagan invests $1,200 each year in an IRA for 12 years in an account that earned...

Meagan invests $1,200 each year in an IRA for 12 years in an account that earned 5% compounded annually. At the end of 12 years, she stopped making payments to the account, but continued to invest her accumulated amount at 5% compounded annualy for the next 11 years.

a.) What was the value of the IRA at the end of 12 years?

b.) What was the value of the investment at the end of the next 11 years?

Expert Solution

As the question is silent about whether Meagan invest $ 1,200 each year at the beginning or end of a year thus, we will calculate value of Meagan in both cases for better understanding.

Please refer below spreadsheet for calculations and answer.

Formula reference -

We can also calculate value of IRA manually through following formula

Future value of constant investment for certain period at certain rate

where,

FV = future value of Investment

CI = constant annual investment

i = interest rate

n = period

Please note = use period as (n-1) for investment made at end of each year.

a. Value of Megan investment at the end of 12 years (assuming investment at beginning of each year)

Future Value of an Investment for certain period and rate of interest.

where,

FV = future value of Investment

I = Initial Investment

i = interest rate

n = period

b. Value of Meagan investment at end of next 11 years

jeff jeffy answered 2 years ago

Beginning at age 30, Ms. Trinh invests $2,000 each year into an IRA account until she...

Beginning at age 30, Ms. Trinh invests $2,000 each year into an IRA account until she retires. When she retires, she plans to withdraw equal amounts each year that will deplete the account when she is 90. Find the annual amount she will receive if she retires at age 70 and the account pays 6% compounded annually.

Victor invests 300 into a bank account at the beginning of each year for 20 years....

Victor invests 300 into a bank account at the beginning of each year for 20 years. The account pays out interest at the end of every year at an annual effective interest rate of i% . The interest is reinvested at an annual effective rate of i / 2 %. The yield rate on the entire investment over the 20 year period, if he would only make deposits of 300 due is 8% annual effective. Determine i.

If you deposit $2,000 at the end of each year into an IRA account that is...

If you deposit $2,000 at the end of each year into an IRA account that is expected to earn 8% per year simple interest, how much will be in the account in 30 years? (Answer to the nearest dollar)

Mary, age 27, annually invests $1,000 in an IRA starting this year through the year of...

Mary, age 27, annually invests $1,000 in an IRA starting this year through the year of her 35th birthday, and then never makes another contribution. Sara, age 36, annually invests $1,000 in an IRA through the year of her 65th birthday. If both Mary and Sara can earn 8% on their investments, who will have more in her IRA account when she retires at the end of her 65th year AND approximately how much more will she have in her...

a lady invests $500 each semiannual period into an IRA paying 10% compounded semiannually. Given that...

a lady invests $500 each semiannual period into an IRA paying 10% compounded semiannually. Given that she is 30 yrs old, finds the amount she will have accumulated at age 54

Susan invests 500 at the end of each year for 7 years at an effective annual...

Susan invests 500 at the end of each year for 7 years at an effective annual interest rate of 5%. The interest credited at the end of each year is reinvested at an effective annual interest rate of 6%. The accumulated value (in both funds) at the end of 7 years is X. Mary invests 100 now at an effective annual interest rate of 6%. The interest credited at the end of each year is reinvested at an effective annual...

12.You want to be able to withdraw $30,000 each year for 30 years. Your account earns...

12.You want to be able to withdraw $30,000 each year for 30 years. Your account earns 6.3% interest. Round all answers to the nearest cent as needed. a) How much do you need in your account at the beginning? $ b) How much total money will you pull out of the account? $ c) How much of that money is interest? $ 13. You have $300,000 saved for retirement. Your account earns 5.6% interest. How much will you be able...

Ruben invested $1300 per year in an IRA each year for 6 years earning 14% compounded...

Ruben invested $1300 per year in an IRA each year for 6 years earning 14% compounded annually. At the end of 6 years he ceased the IRA payments, but continued to invest his accumulated amount at 14% compounded annually for the next 8 years. a) What was the value of his IRA at the end of 6 years? Answer = $ b) What was the value of the investment at the end of the next 8 years? Answer = $

June Watson is contributing $3,500 each year to a Roth IRA. The IRA earns 3.3% per...

June Watson is contributing $3,500 each year to a Roth IRA. The IRA earns 3.3% per year. How much will she have at the end of 35years?

Cam deposited $50,000 into an IRA 30 years ago, what is thevalue of his account...

Cam deposited $50,000 into an IRA 30 years ago, what is the value of his account today if he earned 8% compounded semiannually?