Question

You have just made your first $2,000 contribution to your retirement account. Assuming you earn an 11 percent rate of return and make no additional contributions.

Required:
(a)	What will your account be worth when you retire in 40 years?
	(Click to select)123,501.65135,201.803,009.10136,501.82130,001.73

(b)	What will your account be worth if you wait 9 years before contributing?

Answer 1

Answer to Part a.

Future Value = Present Value* (1 + r) ^ n
Present Value = $2,000
Rate (r) = 11%
Time (n) = 40 years

Future Value = $2,000 * (1 + 0.11)^ 40
Future Value = $2,000 * 1.11^ 40
Future Value = $2,000 * 65.00087
Future Value = $130,001.74

Answer to Part b.

Future Value = Present Value* (1 + r) ^ n
Present Value = $2,000
Rate (r) = 11%
Time (n) = 31 years

Future Value = $2,000 * (1 + 0.11)^ 31
Future Value = $2,000 * 1.11^ 31
Future Value = $2,000 * 25.41045
Future Value = $50,820.90