Compare the accumulated value of an IRA account into which $500 is invested at t

Question

Compare the accumulated value of an IRA account into which $500 is invested at the end of each month; the account earns 2.5% annual interest. Make sure you compare how much was invested and how much interest was earned.

a.       You start at age 25 and retire at 60.

b.       You start at age 30 and retire at 60.

c.        You start at age 35 and retire at 60.

d.       You start at age 40 and retire at 60.

The questions should be answered with a table created in excel. Make sure the column headings are clearly labeled and use appropriate units.

Explanation / Answer

Formula to calculate amounts:

On solving in excel

FV of annuity = P * {[(1+r)^n - 1]/r} FV of annuity = Future value of annuity P = Monthly payment r = rate of interest per month n = number of months

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