(A) In one year, you plan to mkae your first contribution to your individual ret
ID: 2809268 • Letter: #
Question
(A) In one year, you plan to mkae your first contribution to your individual retirement account. If you contribute $100 for each of the next 46 years until you retire, what will your account be worth then? Assume you will earn a 6% yearly compounded rate of return. Show your work.
(B) Suppose you still start with a $100 contribution in one year, but then increase it thereafter each year by 7% until you retire in 46 years. What will your account be worth then? (Note: for the growing annuity formula, the growth rate can exceed the discount rate, but not for the perpetuity formula.) Show your work.
Explanation / Answer
A)
what will your account be worth then
=100*(((1+6%)^46-1)/6%)
=22650.81
B)
What will your account be worth then
=100*((1+6%)^46-(1+7%)^46)/(6%-7%)
=78821.36
the above is answer..
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