Question

elated to The Business of​ Life: Saving for​ Retirement)  ​(Future value of an ordinary​ annuity)  You are graduating from college at the end of this semester and after reading the The Business of Life box in this​ chapter, you have decided to invest

​$4 comma 9004,900

at the end of each year into a Roth IRA for the next

4545

years. If you earn

1010

percent compounded annually on your​ investment, how much will you have when you retire in

4545

​years? How much will you have if you wait 10 years before beginning to save and only make

3535

payments into your retirement​ account?

How much will you have when you retire in

4545

​years?

​$nothing  

​(Round to the nearest​ cent.)

Answer 1

1.Information provided:

Annuity= $4,900

Time= 45 years

Interest rate= 10%

The future value of an ordinary annuity can be computed with the help of a financial calculator. The calculator by default is the END mode which is needed to calculate ordinary annuity values.

The future value can be computed by entering the below:

PMT= 4,900

I/Y= 10

N=45

Press CPT and FV to compute the future value.

The value obtained is 3,522,633.70.

Therefore, I will have $3,522,633.70 in 45 years.

2.Information provided:

Annuity= $4,900

Time= 35 years

Interest rate= 10%

The future value of an ordinary annuity can be computed with the help of a financial calculator. The calculator by default is the END mode which is needed to calculate ordinary annuity values.

The future value can be computed by entering the below:

PMT= 4,900

I/Y= 10

N= 35

Press CPT and FV to compute the future value.

The value obtained is 1,328,019.41.

Therefore, I will have $1,328,019.41 in 35 years.