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You are graduating from college at the end of this semester and after reading the The Business of Life box in this? chapter, you have decided to invest ?$5,900 at the end of each year into a Roth IRA for the next 40years
You are graduating from college at the end of this semester and after reading the The Business of Life box in this? chapter, you have decided to invest
?$5,900 at the end of each year into a Roth IRA for the next 40years. If you earn 8 percent compounded annually on your? investment, how much will you have when you retire in 40 years? How much will you have if you wait 10 years before beginning to save and only make 30 payments into your retirement? account?
How much will you have if you wait 10 years before beginning to save and only make
30 payments into your retirement? account?
Expert Solution
Computation of Accumulated Amount using FV Function in Excel:
=-fv(rate,nper,pmt,pv)
When You retire in 40 years:
Here,
FV = Accumulated Amount or Future Value = ?
Rate = 8%
Nper = 40 years
PMT = $5,900
PV = 0
Substituting the values in formula:
=-fv(8%,40,5900,0)
FV or Accumulated Amount or Future Value = $1,528,433.16
When You retire in 30 years:
Here,
FV = Accumulated Amount or Future Value = ?
Rate = 8%
Nper = 30 years
PMT = $5,900
PV = 0
Substituting the values in formula:
=-fv(8%,30,5900,0)
FV or Accumulated Amount or Future Value = $668,370.95
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