Question

5. You have just made your first $2,000 contribution to your individual retirement account. (a) Assuming you earn a 12% rate of return and make no additional contributions, what will your account be worth when you retire in 45 years

Answer 1

$327,975.21

Step-by-step explanation:

The computation is shown below:

Future value = Present value × (1 + interest rate)^number of years

where,

Present value = $2,000

Rate = 12%

Number of years = 45 years

So, the future value

= $2,000 × (1 + 0.12)^45

= $2000 × 163.987603871

= $327,975.21

Basically we applied the future value formula by considering the present value, time period, and the number of years