Question

In the following ordinary annuity, the interest is compounded with each payment, and the payment is made at the end of the compounding period. An individual retirement account, or IRA, earns tax-deferred interest and allows the owner to invest up to $5000 each year. Joe and Jill both will make IRA deposits for 30 years (from age 35 to 65) into stock mutual funds yielding 9.2%. Joe deposits $5000 once each year, while Jill has $96.15 (which is 5000/52) withheld from her weekly paycheck and deposited automatically. How much will each have at age 65? (Round your answer to the nearest cent.)

Joe $

Jill $

Answer 1

Total amount Joe has at end of (assume all payment are made at end of period) 30 year is calculated in excel and screen shot provided below:

Total amount Joe has at end of 30 year is $707,487.89.

Now, Jill make weekly deposit, so total amount he will have at time of retirement is calculated in excel and screen shot provided below:

Total Amount Jill have at time of retirement will be $802,247.79.