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

Question

3. 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 $5,200 at the end of each year into a Roth IRA for the next 48 years. If you earn 8 percent compounded annually on your investment, how much will you have when you retire in 48 years?

How much will you have if you wait 10 years before beginning to save and only make 38 payments into your retirement account?

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

How much will you have if you wait 10 years before beginning to save and only make 38 payments into your retirement account $______(Round to the nearest cent)

Explanation / Answer

The amount available at the end of 48 years = $2752582.23

Amount available at the end of 38 years = $1237294.35

Note: every year an amount of $5200 is pooled into the existing Principal and interest.

Year Principal Interest @ 8% Total Amount 1 5200 416 5616 2 10816 865.28 11681.28 3 16881.28 1350.50 18231.78 4 23431.78 1874.54 25306.32 5 30506.32 2440.51 32946.83 6 38146.83 3051.75 41198.58 7 46398.58 3711.89 50110.46 8 55310.46 4424.84 59735.30 9 64935.30 5194.82 70130.12 10 75330.12 6026.41 81356.53 11 86556.53 6924.52 93481.06 12 98681.06 7894.48 106575.54 13 111775.54 8942.04 120717.59 14 125917.59 10073.41 135990.99 15 141190.99 11295.28 152486.27 16 157686.27 12614.90 170301.17 17 175501.17 14040.09 189541.27 18 194741.27 15579.30 210320.57 19 215520.57 17241.65 232762.21 20 237962.21 19036.98 256999.19 21 262199.19 20975.94 283175.13 22 288375.13 23070.01 311445.14 23 316645.14 25331.61 341976.75 24 347176.75 27774.14 374950.89 25 380150.89 30412.07 410562.96 26 415762.96 33261.04 449024.00 27 454224.00 36337.92 490561.92 28 495761.92 39660.95 535422.87 29 540622.87 43249.83 583872.70 30 589072.70 47125.82 636198.51 31 641398.51 51311.88 692710.39 32 697910.39 55832.83 753743.23 33 758943.23 60715.46 819658.68 34 824858.68 65988.69 890847.38 35 896047.38 71683.79 967731.17 36 972931.17 77834.49 1050765.66 37 1055965.66 84477.25 1140442.92 38 1145642.92 91651.43 1237294.35 39 1242494.35 99399.55 1341893.90 40 1347093.90 107767.51 1454861.41 41 1460061.41 116804.91 1576866.32 42 1582066.32 126565.31 1708631.63 43 1713831.63 137106.53 1850938.16 44 1856138.16 148491.05 2004629.21 45 2009829.21 160786.34 2170615.55 46 2175815.55 174065.24 2349880.79 47 2355080.79 188406.46 2543487.25 48 2548687.25 203894.98 2752582.23

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