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5 March, 19:18

3) Bill plans to fund his individual retirement account (IRA) by contributing $2,000 at the end of each year for the next 20 years. If Bill can earn 12 percent on his contributions, how much will he have at the end of the twentieth year?

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  1. 5 March, 22:04
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    FV = $144,104.88

    Explanation:

    To determine the amount that Bill will accumulate is the future value of annual amount invested at 12% compounded annually.

    The formula for the future value is given below:

    The investment:

    FV = A * ((1+r) ^n - 1) / r

    r - 12%, A - 2000, n - 20

    FV = 2,000 * ((1.12) ^20 - 1) / 0.12

    FV = 2000 * 72.05244

    FV = $144,104.88
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