5 Find the Value of an Annuity
Solve the problem. Round to the nearest dollar if needed.
-To save for retirement, you decide to deposit $2500 into an IRA at the end of each year for the next 35 years. If the interest rate is 9% per year compounded annually, find the value of the IRA after 35 years.
A)$539,277
B)$48,535
C)$492,456
D)$23,272,500

Question

Quizplus · Accepted Answer

The value of the annuity can be calculated using the future value of an annuity formula: FV = P * [((1 + r)^n - 1) / r], where P is the payment amount, r is the annual interest rate, and n is the number of payments. Plugging in the values (P = $2500, r = 0.09, n = 35), we get FV ≈ $539,277 when rounded to the nearest dollar.