Answer:
The value of her account after 25 years, if she stays true to the plan is:
= $152,823.31.
Explanation:
a) Data and Calculations:
Initial deposits = $35,000
Period of investment = 25 years
Interest rate per year = 3.5% compounded continuously
Annual deposit into the same account = $1,800
Period of investment = 25 at 3.5% interest rate
Total value of her IRA account after 25 years:
Future value of $35,000 = $82,713.57
Future value of $1,800 yearly = 70,109.74
Total future value = $152,823.31
From an online financial calculator:
N (# of periods) 25
I/Y (Interest per year) 3.5
PV (Present Value) 35000
PMT (Periodic Payment) 0
Results
FV = $82,713.57
Total Interest $47,713.57
N (# of periods) 25
I/Y (Interest per year) 3.5
PV (Present Value) 0
PMT (Periodic Payment) 1800
Results
FV = $70,109.74
Sum of all periodic payments $45,000.00
Total Interest $25,109.74
