Bill plans to fund his individual retirement account (IRA) with the maximum contribution of $2,000 at the end of each year for the next 20 years. If Bill can earn 12 percent on his contributions, how much will he have at the end of the twentieth year?

Question

Quizplus · Accepted Answer

Using the formula for future value of an annuity:

FV = PMT((1 + r)^n - 1)/r

Where:
PMT = $2,000
r = 12% (0.12)
n = 20

FV = $2,000((1 + 0.12)^20 - 1)/0.12
FV = $144,104.06

Therefore, Bill will have $144,104 at the end of the twentieth year. The correct answer is D.

Bill Plans to Fund His Individual Retirement Account (IRA) with the Maximum