Question

Sara invests $1,200 each year in an IRA ( 12 years in an account that earned 5%

Answer 1

A)

$\bf \qquad \qquad \textit{Future Value of an ordinary annuity} \\\\ A=pymnt\left[ \cfrac{\left( 1+\frac{r}{n} \right)^{nt}-1}{\frac{r}{n}} \right]$

$\bf \begin{cases} A= \begin{array}{llll} \textit{original amount}\\ \textit{already compounded} \end{array} \begin{array}{llll} \end{array}\\ pymnt=\textit{periodic deposits}\to &1200\\ r=rate\to 5\%\to \frac{5}{100}\to &0.05\\ n= \begin{array}{llll} \textit{times it compounds per year}\\ \textit{each year, once} \end{array}\to &1\\ t=years\to &12 \end{cases}$

B)

let's say after 12years, she ended up with a value of say "P"
so.. now she's just sitting on P, making no more deposits to it
just taking whatever the compound 5% interest will give, thus

$\bf \qquad \textit{Compound Interest Earned Amount} \\\\ A=P\left(1+\frac{r}{n}\right)^{nt} \qquad \begin{cases} A=\textit{compounded amount}\\ P=\textit{original amount deposited}\to &\boxed{P}\\ r=rate\to 5\%\to \frac{5}{100}\to &0.05\\ n= \begin{array}{llll} \textit{times it compounds per year}\\ \textit{again, is only once} \end{array}\to &1\\ t=years\to &11 \end{cases}$


C)

from A) she made 1,200 every year, for 12 years that's 1200*12, that's how much she put out of pocket, if you got an amount P from A), then the interest is just the difference, or P - (1200*12)

from B), she started with an original amount of P, and ended up with a compounded amount of A after 11years, so the interest is just also the difference, or A - P

add those two folks together, and that's the total interest she got for the 23  years