Question

Amy Montalvo is 26. She has $4500 to put into her IRA. Assume that Amy will retire at age 67. What would be the value of the $4500 when Amy reaches 67 if the money in the iRA increases at 10% compound monthly? a. 177,737 b. 157,989 c. 266,957

Answer 1

Answer To the question is Option C) 266,957

Compund Interest Formulae

Final Amount = P (1+ r/n)nt

Were P stands for Principal Amount = 4500

r stands for rate of annual interest =10%

n stands for interest applied per time period = 12 times since it is monthly compounding

t = time period elapsed =41 that is (67-26)

There for

Final Amount = P (1+) r/n))nt

Substituting Values we get

Final Amount = 4500 (1+(0.1/12))12x41

                       =4500(1.008333)492

Solving the equation we get Final Amount =266,957

Working Notes How to calculate (1.008333)492 in calculator

Step 1 take 1.008333 in calculator,

Step 2 press square root function 12 Times

Step 3 Minus 1

Step 4 Multiply by 492

Step 5 Plus 1

Step 6 press the keys X, = 12 times