Question

Your client has decided to invest $2,000 a year (every December 31st) into an IRA over her 40-year working life and then retire. What will your client have if the account earns 10% compounded annually

Answer 1

Answer:

FV=$885,185.11

Explanation:

Giving the following information:

Annual deposit (A)= $2,000

Interest rate (i)= 10%

Number of periods (n)= 40 years

To calculate the future value (FV) of the investment, we need to use the following formula:

FV= {A*[(1+i)^n-1]}/i

A= annual deposit

FV= {2,000*[(1.1^40) - 1]} / 0.1

FV=$885,185.11