Question

You have just made your first $5,500 contribution to your retirement account. Assume you earn a return of 10 percent per year and make no additional contributions.
a. What will your account be worth when you retire in 45 years? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
b. What if you wait 10 years before contributing? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Answer 1

Answer:

a. $400,897.66

b. $154,563.40

Explanation:

The computations are shown below:

We know that

Amount = Present value × (1 + rate)^number of years

a. So the amount for 45 years would be

= $5,500 × (1 + 0.10)^45

= $5,500 × 72.8904836851

= $400,897.66

b. The amount before 10 years means 45 years - 10 years = 35 years

= $5,500 × (1 + 0.10)^35

= $5,500 × 28.1024368481

= $154,563.40