SOLUTION: Earl Broker is 25 years old, senior in college and he decides to put $150 every year in a Roth IRA through Vanguard Total Stock Market ETF. It gives the return of 10%. Find the tot

Algebra ->  Customizable Word Problem Solvers  -> Finance -> SOLUTION: Earl Broker is 25 years old, senior in college and he decides to put $150 every year in a Roth IRA through Vanguard Total Stock Market ETF. It gives the return of 10%. Find the tot      Log On

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Question 1164856: Earl Broker is 25 years old, senior in college and he decides to put $150 every year in a Roth IRA through Vanguard Total Stock Market ETF. It gives the return of 10%. Find the total sum he will receive when he will withdraw the money in his 65th birthday.
Answer by ikleyn(52925) About Me  (Show Source):
You can put this solution on YOUR website!
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It is a classic Ordinary Annuity saving plan. The general formula is 


    FV = P%2A%28%28%281%2Br%29%5En-1%29%2Fr%29,    (1)


where  FV is the future value of the account;  P is your annual payment (deposit); r is the annual percentage rate 

presented as a decimal; n is the number of deposits (= the number of years, in this case).



Under the given conditions, P = 150;  r = 0.10;  n = 40 years.  So, according to the formula (1), Earl will get 

at the end of the 40-th year


    FV = 150%2A%28%28%281%2B0.10%29%5E40-1%29%2F0.10%29 = $66388.88.      ANSWER

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On Ordinary Annuity saving plans,  see the lessons
    - Ordinary Annuity saving plans and geometric progressions
    - Solved problems on Ordinary Annuity saving plans
in this site.

The lessons contain  EVERYTHING  you need to know about this subject,  in clear and compact form.

When you learn from these lessons,  you will be able to do similar calculations in semi-automatic mode.