Question

1. Ethan is 48 years old. He is planning on retiring when he turns 62. He has opened an IRA with an
APR of 2.95 compounded monthly. If he makes monthly deposits of $850 to the account, how
much will he have in the account when he is ready to retire?

Answer 1

Answer:

Step-by-step explanation:

2.95 times 12 =35.4 that's how much is taken away in a year. 62-48=14 years to collect money. 35.4 times 14= 495.6, this is how much would be taken throughout those years. 850 times 12=10,200, this is how much he would put in a year. that times 14 is 142,800 minus the 495.6= 142, 304.4

Answer 2

The amount of money that Ethan would have in his IRA account in 14 years when he retires  is $177,195.78.

How much would Ethan have in his account when he retires?

The formula that can be used to determine the value of his account when he retires is:

Monthly deposit x annuity factor

Annuity factor = {[(1+r)^n] - 1} / r

Where:

• r = interest rate = 2.95 / 12 = 0.246%
• n = number of periods = 12 x 14 = 168

Future value = 850 x{ [1.0025^168) - 1] / 0.0025} = $177,195.78

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