Find the Value of an Annuity
-To save for retirement, you decide to deposit $2250 into an IRA at the end of each year for the next 40 years. If the interest rate is 8% per year compounded annually, find the value of the IRA after 40 years.
A) $582,877
B) $46,630
C) $537,618
D) $13,779,108

Question

Quizplus · Accepted Answer

The future value of an annuity is given by the formula:FV = P * ((1 + r)^n - 1) / rwhere:P is the annual paymentr is the annual interest raten is the number of yearsIn this case, we have:P = $2250r = 8% = 0.08n = 40Plugging these values into the formula, we get:FV = $2250 * ((1 + 0.08)^40 - 1) / 0.08= $2250 * (14.207 - 1) / 0.08= $2250 * 13.207 / 0.08= $582,877Therefore, the value of the IRA after 40 years is $582,877.