Question

Margaret Moore is a sales executive at a Baltimore firm. She is 25 years old and plans to invest $4,100 each year in an IRA account until she is 65 at which time she will retire (a total of 40 payments). If Margaret invests at the beginning of each year, and the IRA investment will earn 8.00 percent annually, how much will she have when she retires? Assume that she makes the first payment today

Answer 1

Margaret will deposit $4100 each starting from today for 40 years until she retires.

Calculating the Accumulated value in 40 years using FV of annuity due formula:-

Where, C= Periodic Deposits = $4100

r = Periodic Interest rate = 8%

n= no of periods = 40

Future Value = $1,147,102.26

So, the amount she will have when she retires is $1147,102.26

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