Question

You are depositing $1,500 in a retirement account today and expect to earn an average return of 6.5 percent on this money. How much additional income will you earn if you leave the money invested for 50 years instead of just 40 years?

Answer 1

$16,335.90622

Step-by-step explanation:

The computation of the additional income earned is shown below:

For 40 years

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

= $1,500 × (1 + 0.065)^40

= $18,624.1118

For 50 years

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

= $1,500 × (1 + 0.065)^50

= $34,960.01802

Now the additional amount is

= $34,960.01802 - $18,624.1118

= $16,335.90622