You have just made your first $5,700 contribution to your retirement account. As
ID: 2814259 • Letter: Y
Question
You have just made your first $5,700 contribution to your retirement account. Assume you earn an 13 percent rate of return and make no additional contributions.
What will your account be worth when you retire in 38 years?
What if you wait 10 years before contributing?
You have just made your first $5,700 contribution to your retirement account. Assume you earn an 13 percent rate of return and make no additional contributions.
What will your account be worth when you retire in 38 years?
What if you wait 10 years before contributing?
Explanation / Answer
We use the formula:
A=P(1+r/100)^n
where
A=future value
P=present value
r=rate of interest
n=time period.
a.
A=$5700*(1.13)^38
=$5700*103.9874318
which is equal to
=$592,728.36(Approx).
2.
A=$5700*(1.13)^28
=$5700*30.63348575
which is equal to
=$174,610.87(Approx).
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