You just graduated and landed your first job in your new career.You remember that your favorite finance professor told you to begin the painless job of saving for retirement as soon as possible,so you decided to put away $2,000 at the end of each year in a Roth IRA.Your expected annual rate of return on the IRA is 7.5%.How much will you accumulate at retirement after 40 years of investing (note: this may assume that you are even retiring early)?
A)$94,426
B)$247,921
C)$1,088,632
D)$454,513

Question

Quizplus · Accepted Answer

The future value of an annuity formula is used to calculate the total amount accumulated after making regular contributions at a fixed interest rate. Using the formula FV = P * [((1 + r)^n - 1) / r], where P is the annual contribution ($2,000), r is the annual interest rate (7.5% or 0.075), and n is the number of years (40), the future value is approximately $454,513.

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