A $3,000 annual contribution to a retirement account earning 6% will be worth approximately _____ in 20 years.

Question

Quizplus · Accepted Answer

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

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

where:
PMT = $3,000 (the annual contribution)
r = 6% = 0.06 (the annual interest rate)
n = 20 (the number of years)

Plugging in the numbers, we get:

FV = $3,000 x ((1 + 0.06)^20 - 1) / 0.06
FV = $3,000 x (1.06^20 - 1) / 0.06
FV = $3,000 x 45.585
FV = $136,755

Therefore, the approximate value of the retirement account in 20 years is $110,360 (rounded to the nearest dollar).

A $3,000 Annual Contribution to a Retirement Account Earning 6