Question
In: Finance
Shaylea, age 22, just started working full-time and plans to deposit $5,800 annually into an IRA...
Shaylea, age 22, just started working full-time and plans to deposit $5,800 annually into an IRA earning 10 percent interest compounded annually. How much would she have in 20 years, 30years, and 40 years? If she changed her investment period and instead invested $483.33 monthly, and the investment also changed to monthly compounding, how much would she have after the same three time periods? Comment on the differences over time.
With monthly investments and monthly compounding interest, after 20 years, Shaylea would have $?
With monthly investments and monthly compounding interest, after 30 years, Shaylea would have $?
With monthly investments and monthly compounding interest, after 40 years, Shaylea would have $?
Solutions
Expert Solution
From all abve Future Vaues, it is clear that MORE THE TIME, MORE THE FUTURE VALUE. It is because of the COMPOUNDING EFFECT. As more and more time passes, INTEREST KEEPS ON EARNING ON THE PREVIOUSLY EARNED INTEREST ALSO. Therefore, it will lead to SIGNIFICANTLY HIGHER FUTRE VALUE as more and more time passes and more and more compounding happens.
jeff jeffy answered 1 year agoRelated Solutions
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