Problema Solution
If a merchant deposits $1,500 annually at the end of each tax year in an IRA account paying interest at the rate of 10%/year compounded annually, how much will she have in her account at the end of 25 years?
Answer provided by our tutors
R = $1,500
r = 0.10 or 10%
n = 25
S = future value
S = R[((1 + i)^n - 1)/i]
S = 1500[((1 + 0.10)^25 - 1)/0.10]
S = $147,520.59
After 25 years the merchant will have $147,520.59 in her account.