1. How much will you have accumulated over a period of 5 years if, in an IRA whi
ID: 2451896 • Letter: 1
Question
1. How much will you have accumulated over a period of 5 years if, in an IRA which has a 10% interest rate compounded biannually, you annually invest:
A. $1
B. $500
C.$1200
D. Part (A) is called the effective yield of an account. How could part(A) be used to determine parts (B) and (C)?
2. How much will you have accumulated, if you annually invest $1500 into an IRA at 12% interest compounded monthly for
A. 1 year
B. 10 years
C. 25 years
D. How long will it take you to earn your first million dollars? Using Logarithms to solve. Round to nearest hundredth.
Explanation / Answer
Solution:
(1).
Annually Investment = P( 1 + 0.10 / 100 ) 5
= 1.61
(2).
t = log(A/P) / n[log(1 + r/n)]
= 1,500 * 12 / 100 = 180
t = log(1680/1500) / n [log(1+12%/n)]
= 0.95 Years
Annually Investment = Principal ( 1 + r / 100 )nRelated Questions
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