Question

Suppose Amanda wants to have $800,000 in her IRA at the end of 30 years. She chooses to invest in an annuity that pays
5% interest, compounded annually. How much of her IRA is interest at the end of 30 years?
Round your answer to the nearest dollar.
Do NOT round until you have calculated the final answer.

Answer 1

Her IRA interest at the end of 30 years is mathematically given as

Interest= 438,765.56

IRA interest

Question Parameters:

• N = 30
• PV = 0
• rate = 5%
• FV = 800,000

Generally the equation for the payment function on excel is mathematically given as

A=PMT(rate, nper, pv, [fv], [type])

Therefore, inputting our functions

A=PMT(rate, nper, pv, [fv], [type])

where

A=PMT(5%, 30, 0, [800000], [])

A = 12,041.1481

Hence

interest = 800,000 - 30*12,041.1481

Interest= 438,765.56

For more information on Growth rate

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