Question 1048411: You deposit $50,000 into a retirement account at the age of 20, making an average of 8% annual return. How much will you have at the age 65?
Answer by addingup(3677)   (Show Source):
You can put this solution on YOUR website! If you start at 20 and you save until you are 65: 65-20 = 45 years of savings.
The formula we need to use is:
A = P(1+r)^t
A is the final amount
P is the principal, in this case 50000
r is the interest rate, in this case 0.08 or 8%
t is the time, in this case 45 years
:
Let's put it all together:
A = 50,000(1+0.08)^45 = 1,596,022.47
You are seeing correctly, 50,000 turn into over 1.5 million. This exercise is to teach you the power of compounding.
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