You are graduating from college at the end of this semester and after reading th

Question

You are graduating from college at the end of this semester and after reading the Business of Life box in this chapter, you have decided to invest $5,000 at the end of each year into a Roth IRA for the next 45 years. If you earn 8 percent compounded annually on your investment, 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?

How much will you have when you retire in 48 Years? ____ (Round to the nearest cent)

Explanation / Answer

Amount in 45 years = 5000 x Future value of $1 @8% for 45 years

= 5000 x 386.5056

= $1932528

Amount in account if you wait 10 years before beginning to save and only make 35 payments into your retirement account = 5000 x Future value of $1 @8% for 35 years

= 5000 x 172.3168

= $861584

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