Question

(Related to The Business of​ Life: Saving for​ Retirement)  ​(Future value of an ordinary​ annuity)  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 ​$4,800 at the end of each year into a Roth IRA for the next 47 years. If you earn 8 percent compounded annually on your​ investment, how much will you have when you retire in 47 ​years? How much will you have if you wait 10 years before beginning to save and only make 37 payments into your retirement​ account? How much will you have when you retire in 47 ​years? ​$ nothing  ​(Round to the nearest​ cent.)

Answer 1

The question can be solved both using excel function =FV and also using the Future Value of ordinary annuity equations. Have provided both the methods below for reference:

Investment value in 47 ​years = $2,173,920.73

Investment value in 47 years if only 37 payments are made waiting for 10 years before beginning to save = $974,737.54