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20 November, 01:22

You have just made your first $5,000 contribution to your individual retirement account. Assume you earn an annual return 11.1 percent and make no additional contributions. What will your account be worth when you retire in 43 years? (Do not round intermediate calculations and round your answer to 2 decimal places, e. g., 32.16.) Account value $ 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.) Account value $

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  1. 20 November, 01:32
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    The correct answer is $462,034.64 and $161,262.71.

    Explanation:

    According to the scenario, the given data are as follows:

    Payment (pmt) = $5,000

    Rate of interest (r) = 11.1%

    Time period (t1) = 43 years

    If wait 10 years then time period (t2) = 43 - 10 = 33 years

    So, we can calculate the future value by using following formula:

    Future value = Pmt (1 + r) ^t

    For t1 = 43 years

    FV = $5,000 (1 + 11.1%) ^43

    = $5,000 (1 + 0.111) ^43

    = $5,000 * 92.406928377

    = $462,034.641885

    = $462,034.64

    For t2 = 33 years

    FV = $5,000 (1 + 11.1%) ^33

    = $5,000 (1 + 0.111) ^33

    = $5,000 * 32.2525416728

    = $161,262.708364

    = $161,262.71

    Hence, Account value for 43 years is $462,034.64 and for 33 years is $161,262.71.
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