An annual contribution of $3,000 to a retirement account that earns 6% will be worth approximately _____ in 20 years. (Round the answer to the nearest whole dollar.)
A) $60,120
B) $96,788
C) $100,000
D) $110,357
E) $192,624

Question

Quizplus · Accepted Answer

We can use the formula for future value of an annuity:

FV = PMT * ((1+i)^n - 1)/i

Where:
PMT = Annual contribution = $3,000
i = Interest rate per period = 6%/year = 0.06/12/month
n = Number of periods = 20 years * 12 months/year = 240 months

Plugging in the values:

FV = 3,000 * ((1+0.06/12)^240 - 1)/(0.06/12) ~= $110,357

Rounding to the nearest whole dollar, the answer is D) $110,357.

An Annual Contribution of $3,000 to a Retirement Account That