SOLUTION: I have an idea of how to do this problem but would appreciate help to make sure I am right. Thanks so much Meagan invests $1,200 each year in an IRA for 12 years in an account t

Question 1168730: I have an idea of how to do this problem but would appreciate help to make sure I am right. Thanks so much
Meagan invests $1,200 each year in an IRA for 12 years in an account that earned 5% compounded annually. At the end of 12 years, she stopped making payments to the account, but continued to invest her accumulated amount at 5% compounded annually for the next 11 years.
a. What was the value of the IRA at the end of 12 years?

b. What was the value of the investment at the end of the next 11 years?
Answer by Theo(13342) (Show Source): You can put this solution on YOUR website!
you are looking for the future value of 1200 payments made at the end of each year for 12 years followed by the future value of the future value for the next 11 years, all at 5% per year.

this is most easily done with the following online calculator.

i also did it with my ti-ba-ii business analyst calculator.

that told me the following:

the future value of the payments for 12 years is 19,100.55182.
the future value of 19,100.55182 for 11 years is 32,668.42555.

using the online calculator, i get:

the future value of the payments for 12 years is 19,200.55
the future value of 19,200.55 for 11 years is 32,668.42

the online calculator rounds to the penny.
the ti-ba-ii rounds to the capability of the display.

the answers are still very close to each other.

inputs for the first 12 years are:

present value = 0
future value = 0
payment at the end of each year = -1200.
interest rate = 5% per year.
number of years = 12
compute future value to get:
future value = 19,100.55

inputs for the next 11 years are:

present value = -19,100.55
future value = 0
payments at the end of each year = 0
interest rate = 5% per year.
number of years = 11
compute future value to get:
future value = 32,668.42

here's what the inputs and output look like from the online financial calculator.

the time periods are in years.
number of years is the same as number of time periods.
interest rate per time period is the same as interest rate per year.

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