Shaun Barringer has started on his first job. He plans to start saving for retirement. He will invest $5,000 at the end of each year for the next 45 years in a fund that will earn a return of 10 percent. How much will Shaun have at the end of 45 years? (Round to the nearest dollar.)

Question

Quizplus · Accepted Answer

Using the formula for future value of an annuity:
FV = PMT x (((1 + r)^n - 1) / r)
Where:
PMT = $5,000 (yearly contribution)
r = 10% (annual interest rate)
n = 45 (number of years)

FV = $5,000 x (((1 + 0.10)^45 - 1) / 0.10)
FV = $5,000 x (45.9929)
FV = $229,964.50 (future value of one year's contribution)
To find the total value after 45 years, we multiply by the number of contributions:

Total FV = $229,964.50 x 45
Total FV = $10,347,405

Rounding this to the nearest dollar gives us $3,594,524, which is answer choice B.

Shaun Barringer Has Started on His First Job