When Jamal graduated from college recently, his parents gave him $1,170 and told

Question

When Jamal graduated from college recently, his parents gave him $1,170 and told him to use it wisely. Jamal decided to use the money to start a retirement account. After doing some research about different options, he put the entire amount into a tax-deferred IRA that pays 12 percent interest, compounded annually. Calculate how much money Jamal will have in his IRA at the end of 10 years, assuming that the interest rate remains the same and that he does not deposit any additional money. Use Exhibit 1-A.(Round time value factor to 3 decimal places and final answer to 2 decimal places.)

When Jamal graduated from college recently, his parents gave him $1,170 and told him to use it wisely. Jamal decided to use the money to start a retirement account. After doing some research about different options, he put the entire amount into a tax-deferred IRA that pays 12 percent interest, compounded annually. Calculate how much money Jamal will have in his IRA at the end of 10 years, assuming that the interest rate remains the same and that he does not deposit any additional money. Use Exhibit 1-A.(Round time value factor to 3 decimal places and final answer to 2 decimal places.)

Explanation / Answer

ANswer : Jamal will have in his IRA at the end of 10 years =$3633.84

Working notes for the above answer is as under

Present value is $1,170,

Years or n= 10,

Interest or i= .12

FV=PV (1.00 + i )^nFV

= $1,170 (1.00 + .12)^10

FV=$1170* 3.1058

=$ 3633.84

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