Question

Sally makes deposits into a retirement account every year from the age of 30 until she retires at age 65. a) Sally deposits $1250 per year and the account earns interest at a rate of 7% per year, compounded annually, how much does she have in the account when she retires? b) How much of that total amount is from Sally's deposits? How much is interest? a) Sally will have in the account when she retires, (Round to the nearest cont as needed.)

Answer 1

Answer:

a) $13345.73

b) $ 12095.73

Step-by-step explanation:

a) Formula for compound interest: A = P(1 + r/n)^n*t

Step 1: Write the data

Principal = P = 1250

rate = r = 7% = 7/100 = 0.07

Time = retirement age - starting age = 65 - 30 = 35

n = number of periods = 1 (compounded annually)

Amount = A = ?

Step 2: Apply the data in the formula

A = P(1 + r/n)^n*t

A = 1250 (1 + 0.07/1)^1*35

A = 13345.73

Sally will have $13345.73 in the account when she retires.

b) The total amount from Sally's deposit can be derived by subtracting the total amount found in part a by the amount deposited.

Amount - Sally's deposit = x

x = 13345.73 - 1250

x = 12095.73

The total amount from Sally's deposit is $12095.73. Therefore, the interest given to Sally on her deposit is $12095.73.

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