You are graduating from college at the end of this semester and have decided to

Question

You are graduating from college at the end of this semester and have decided to invest $5,000 at the end of each year into a Roth IRA, (which is a retirement investment account that grows tax free and is not taxed when it is liquidated) for the next 45 years. If you earn 8 percent compounded annually on your investment of $5,000 at the end of each year, how much will you have when you retire in 45 years? How much will you have if you wait 10 years before beginning to save and only make 35 payments into your retirement account?

Explanation / Answer

Annual Investment = 5000

rate = 8% p.a.

Number of years =45

Future Value at the end of 45 years =-FV(0.08,45,5000)=$ 1,932,528.09

b.) number of years = 35

Future Value at the end of 45 years with only 35 instalments=-FV(0.08,35,5000)=$ 861,584.02

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