If a merchant deposits $2,000 annually at the end of each tax year in an IRA account paying interest at the rate of 4%/year compounded annually, how much will she have in her account at the end of 20 years? Round your answer to two decimal places.
A) $4,382.25
B) $59,556.16
C) $3,600.00
D) $25,901.32

Question

If a merchant deposits $2,000 annually at the end of each tax year in an IRA account paying interest at the rate of 4%/year compounded annually, how much will she have in her account at the end of 20 years? Round your answer to two decimal places. ​
A) $4,382.25
B) $59,556.16
C) $3,600.00
D) $25,901.32

Quizplus · Accepted Answer

Using the formula for compound interest with regular deposits: 
A = PMT * (((1 + r/n)^(n*t) - 1)/(r/n)) + PMT * (1 + r/n)^(n*t)
where A is the final amount, PMT is the regular deposit, r is the interest rate, n is the number of times interest is compounded per year, and t is the number of years.
Plugging in the values, we get:
A = 2000 * (((1 + 0.04/1)^(1*20) - 1)/(0.04/1)) + 2000 * (1 + 0.04/1)^(1*20)
A = $59,556.16 (rounded to two decimal places)

If a Merchant Deposits $2,000 Annually at the End of Each