You have $5,000 in an index mutual fund.At an average annual rate of return of 10% per year,this investment should exceed a value of $500,000 by the time you retire in 40 years.

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Using the formula for compound interest, $A = P(1 + \frac{r}{n})^{nt}$, where $A$ is the amount of money accumulated after n years, including interest, $P$ is the principal amount ($5,000), $r$ is the annual interest rate (10% or 0.10), $n$ is the number of times that interest is compounded per year (assuming annually, so 1), and $t$ is the time the money is invested for (40 years), the calculation would be $A = 5000(1 + \frac{0.10}{1})^{1*40}$. This does not exceed $500,000, but rather results in an amount significantly less than that, demonstrating that the statement is false.

You Have $5,000 in an Index Mutual Fund