Question

1. Meagan invests $1,200 each year in an IRA for 12 years in an account that earned 5% compounded annually. At the end of 12 years, she stopped making payments to the account, but continued to invest her accumulated amount at 5% compounded annually for the next 11 years. a. [3 pts] What was the value of the IRA at the end of 12 years? Formula 1 Work* 1.5 I Answef 0.5 b. [2 pts] What was the value of the investment at the end of the next 11 years? Formula Work* 1 0.5 0.25 Answer Explanation 0.25 3

Answer 1

As per rules I am answering the first 4 subparts of the question

1a: value of IRA after 12 years= Future Value of annuity = A* ((1+rate)^n-1)/rate

= 1200*((1+5%)^12-1)/5%

= 19100.55

B: value of the investment after 11 years= Future value=Present value*(1+Rate)^number of periods

=19100.55*(1+5%)^11

= 32668.42

2:A Amount at 65 years = Future Value of annuity = A* ((1+rate)^n-1)/rate

= 1800*((1+6%/4)^(40*4)-1)/(6%/4)

= 1179415.39

B: Amount of contribution = 1800*40*4= 288000

C: Interest earned = 1179415.39-288000= 891415.39