You are at the end of 20 and laying away a nest egg of $10,000 a year for ten ye
ID: 2739112 • Letter: Y
Question
You are at the end of 20 and laying away a nest egg of $10,000 a year for ten years (at the end of each year). You invest it into the stock markets for the retirement years. Assume that the rate of return after adjustment for inflation will be 7% per year. You do not lay away a single additional dime for the remainder of your working years (that is, you do not contribute anything to your retirement account after the first 10 years). What will be the value of your retirement account at the age of 65?
a.
$1,876,321
b.
$1,670,316
c.
$2,134,502
d.
$1,049,721
e.
$1,475,124
a.
$1,876,321
b.
$1,670,316
c.
$2,134,502
d.
$1,049,721
e.
$1,475,124
Explanation / Answer
Amount in the account at the age of 65 = [10000 x Future value of an annuity @ 7% for 10 years] x (1.07)^35
= [10000 x 13.816] x 10.676581
= $1475076
which is close to Answer e.
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