Question

Patricia Johnson is a sales executive at a Baltimore firm. She is 25 years old and plans to invest $4,200 every year in an IRA account, beginning at the end of this year until she reaches the age of 65. If the IRA investment will earn 10.25 percent annually, how much will she have in 40 years, when she turns 65?

Answer 1

Future value of annuity	=	Amount*[{(1=+r)^n -1}/r]
		Time (n)	=	40     years
		rate	=	10.25% or 0.1025
		amount	=	$4,200
Future value of annuity	=	$4,200*[{(1+0.1025)^40}-1]/0.1025
Future value of annuity	=	$4,200*[{(1.1025)^40}-1]/0.1025
Future value of annuity	=	$4,200*[{ j49.5614-1}]/0.1025
Future value of annuity	=	$4,200*[48.5614/0.1025]
Future value of annuity	=	$4,200*473.77
Future value of annuity	=	$ 1,989,834.00
		=
	amount after 40 years will be $1,989,834
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