Question

1-You deposit $7000 each year into your retirement account, starting in one year. If these funds earn an average of 8% per year over the 26 years until your retirement, what will be the value of your retirement account upon retirement?

2-You had $3333 withheld for federal income taxes and a tax liability of $2376? How much should you be refunded?

Answer 1

1)

Future value of annuity= payment per period * [(1+i)^n-1]/i

i = interest rate per period

n = number of periods

=>

Future value = 7000 * [(1+8%)^26 - 1]/8%

= 559680.91

2)

refund amount = 3333 - 2376

= 957