If a 16-year-old high school student put $2,000 at the end of each year for 4 years into an IRA that earned a rate of 9%, how much would she have accumulated by age 65? Assume funds are left to accumulate for 45 years (age 20-65) at 9%.
A) $442,014
B) $386,616
C) $1,767,995
D) $9,146

Question

Quizplus · Accepted Answer

To calculate the accumulated value of the IRA, we need to use the formula for future value of annuity:

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

where:
PMT = $2,000 (annual contribution)
r = 9% (annual interest rate)
n = 45 (number of years)

Thus, the accumulated value of the IRA would be:

FV = $2,000 x [(1 + 0.09)^45 - 1] / 0.09
FV = $442,014

Therefore, the best choice is (A).

If a 16-Year-Old High School Student Put $2,000 at the End