Joe plans to fund his individual retirement account (IRA) with the maximum contribution of $2,500 at the end of each year for the next 30 years. If Joe can earn 10 percent on his contributions, how much will he have at the end of the tenth year?

Question

Quizplus · Accepted Answer

The future value of an annuity is calculated as follows:FV = P * [(1 + r)^n - 1] / rwhere:P is the periodic paymentr is the interest raten is the number of periodsIn this case, P = $2,500, r = 10%, and n = 10. Plugging these values into the formula, we get:FV = $2,500 * [(1 + 0.10)^10 - 1] / 0.10= $2,500 * [2.5937 - 1] / 0.10= $2,500 * 1.5937 / 0.10= $41,123.50Therefore, Joe will have $41,123.50 at the end of the tenth year.

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