How much will you have accumulated over a period of 40 years if, in an IRA which

Question

How much will you have accumulated over a period of 40 years if, in an IRA which has a 6% interest rate compounded monthly, you annually invest:

a. $1

b. $600

c. $5,000

d. Part (a) is called the effective yield of an account. How could Part (a) be used to determine Parts (b) and (c)? (Your answer should be in complete sentences free of grammar, spelling, and punctuation mistakes.)

2) How much will you have accumulated, if you annually invest $2000 into an IRA at 10% interest compounded quarterly for:

a. 5 years

b. 10 years

c. 25 years

d. How long will it take to earn your first million dollars?

Explanation / Answer

Amount = Principal( 1+ rate/12)^(12*n)

a) P =$1

Amount = 1( 1+ 0.06/12)^(12*40)

= $10.957

b) P = $600

Amount = 600*( 1+ 0.06/12)^(12*40)

= $600*10.957 = $ 6574.47

c) P = $5000

Amount = 5000*( 1+ 0.06/12)^(12*40)

= 5000*10.957 = $54785

d) Part given the effective annual yield of the retirmenet account, the amounts in opart b and c

would be value in part (a) x amount invested.

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