If your parents put $2,000 a year into an IRA account for you in each of your last 4 teenage years (ages 16, 17, 18, and 19), how much would the IRA account have in it at your retirement 45 years later if the account earned 12% each year? (Assume end-of-year payments.)
A) $1,569,758
B) $ 68,613
C) $3,457,169
D) $1,148,958

Question

Quizplus · Accepted Answer

The future value of an annuity formula is used to calculate the future value of a series of investments or payments at a certain interest rate. The formula is FV = P * [((1 + r)^n - 1) / r], where P is the payment amount, r is the annual interest rate (as a decimal), and n is the number of periods. In this case, P = $2,000, r = 0.12 (12%), and n = 45 years. Plugging these values into the formula gives the future value of the IRA account, which is approximately $1,569,758.

If Your Parents Put $2,000 a Year into an IRA