Question

You are graduating from college at the end of this semester and after reading the Business of Life box in this chapter, you have decided to invest $4300 at the end of each year into a Roth IRA for the next 46 years. If you earn 9 percent compounded annually on your investment, how much will you have when you retire in 46 years? How much will yoi have if you wait 10 years before beginning to save and only make 36 payments into your retirement account?

Question 6.3

Answer 1

a.	Future value in 46 Years	=	Annual cash flow	*	Future value of annuity of 1
		=	$          4,300.00	*	574.186
		=	$ 24,68,999.89
	Working:
	Future value of annuity of 1	=	(((1+i)^n)-1)/i		Where,
		=	(((1+0.09)^46)-1)/0.09		i	=	9%
		=	574.1860206		n	=	46
b.	Future value in 46 Years	=	Annual cash flow	*	Future value of annuity of 1
		=	$          4,300.00	*	236.1247
		=	$ 10,15,336.31
	Working:
	Future value of annuity of 1	=	(((1+i)^n)-1)/i		Where,
		=	(((1+0.09)^36)-1)/0.09		i	=	9%
		=	236.1247226		n	=	36