Question

Debra, age 51, is self-employed and has never made a lot of money. But, she has consistently saved $4632 per year into a traditional IRA. Over the years, she has taken full advantage of the tax law and deducted each year’s contribution from her tax return. If Debra started saving at age 26 and has earned an average annual return of 5%, how much is the account worth today?
A. $619398.

B. $48556.

C. $23677.

D. $221072.

Answer 1

Answer:

D. $221072.

Explanation:

In this question, we use the future value formula which is shown in the spreadsheet.  

The NPER represents the time period.

Given that,  

Present value = $0

Rate of interest = 5%

NPER = 25 years

PMT = 4,632

The formula is shown below:

= -FV(Rate;NPER;PMT;PV;type)

So, after solving this, the answer would be $221,071.92