Question

You have just made your first $3,000 contribution to your retirement account. Assuming you earn an 7 percent rate of return and make no additional contributions.

Required:
(a)	What will your account be worth when you retire in 40 years?
	(Click to select)47,169.5442,677.2046,720.313,890.6044,923.37

(b)	What will your account be worth if you wait 9 years before contributing?
	(Click to select)25,412.7523,213.5724,435.345,515.3825,657.11

Answer 1

Answer:
Given that:

(a).What will your account be worth when you retire in 40 years?

Future Value = Present Value* (1 + r) ^ n
Present Value = $3,000
Rate (r) = 7%
Time (n) = 40 years

Future Value = $3,000 * (1 + 0.07)^ 40
Future Value = $3,000 * 1.07^ 40
Future Value = $3,000 * 14.97445784
Future Value = $3014.975

(b).What will your account be worth if you wait 9 years before contributing?

Future Value = Present Value* (1 + r) ^ n
Present Value = $3,000
Rate (r) = 7%
Time (n) = 31 years

Future Value = $3,000 * (1 + 0.07)^ 31
Future Value = $3,000 * 1.07^ 31
Future Value = $3,000 * 8.145112896
Future Value = $3008.145

Answer 2

SOLUTION :

a. Future value starting now =  44,923.38 (ANSWER)

Work :

FV available after 40 years :

= Amount invested ( 1 + r)^n 

= 3000 (1 + 0.07)^40

= 44923.38 ($)  

b.  Future value if waiting 9 years = 24,435.34 (ANSWER)

Work :

If deposit of $3,000 is made after waiting 9 years from now,

FV available after 40 years :

= Amount invested ( 1 + r)^n 

= 3000 (1 + 0.07)^(40 - 9)

= 24435.34 ($)