You have just made your first $5,300 contribution to your retirement account. As

Question

You have just made your first $5,300 contribution to your retirement account. Assume you earn an 11 percent rate of return and make no additional contributions. What will your account be worth when you retire in 42 years? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))

Future value = $ ?

What if you wait 10 years before contributing? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))

Future value = $ ?

Explanation / Answer

You have just made your first $5,300 contribution to your retirement account. Assume you earn an 11 percent rate of return and make no additional contributions. What will your account be worth when you retire in 42 years?

FV = $5300(1 + .11)42 = $424,464.1

What if you wait 10 years before contributing? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))

The money has 10 years less time to grow. So it looks like this:

FV = $5300(1 + .11)32 = $149,489.70

Morale of the story ---> Start saving for retirement as early as possible in your career. Try not to prograstinate or do it later.

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