Robin, who is self-employed, contributes $5,500/year into a Keogh account. How much will he have in the account after 15 years if the account earns interest at the rate of 8.5%/year compounded yearly?
A) $155,277.48
B) $18,698.59
C) $219,983.36
D) $6,623.25

Question

Robin, who is self-employed, contributes $5,500/year into a Keogh account. How much will he have in the account after 15 years if the account earns interest at the rate of 8.5%/year compounded yearly? ​
A) $155,277.48
B) $18,698.59
C) $219,983.36
D) $6,623.25

Quizplus · Accepted Answer

The future value of an investment can be calculated using the formula for compound interest: FV = P(1 + r)^n, where P is the principal amount (initial investment), r is the annual interest rate (as a decimal), and n is the number of years. In this case, Robin contributes $5,500 each year, so we use the formula for the future value of a series: FV = P[((1 + r)^n - 1) / r]. Plugging in the values: FV = $5,500[((1 + 0.085)^15 - 1) / 0.085], which calculates to approximately $155,277.48.

Robin, Who Is Self-Employed, Contributes $5,500/year into a Keogh Account