For Frank,
Interest Rate ( R ) = 6.3%
Time (n) = 50 yrs
P = $ 1000
After 50 Years Cash in the IRA account = P*((1+R)^n – 1)/R
= 1000*(1.063^50 - 1)/.063
Available Cash in Frank’s account after 50 years = $320888.7
For Gloria
Effective annual interest rate = (1+5%/365)^365 - 1
5.127 %
Let us assume that annuity for Gloria= A
Then,
320888.7 = A*(1.05127^50 - 1)/.05127
320888.7 = A*218.0975
A = $1471.308
So, annuity = $1471.308 in her IRA account balance to equal Frank’s after 50 years
Frank funds his IRA, with 6.3% effective annual interest, at $1,000 per year for 50 years....
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