How much will you have from the IRA when you retire at age 65? Use this formula: Find how much of the total amount is from interest.
Answer these questions below...
1. At age 30, to save for retirement, you decide to deposit $300 into an IRA at the end of each month at an interest rate of 6% per year compounded monthly.
How much will you have from the IRA when you retire at age 65? Use this formula:
Find how much of the total amount is from interest.
Question 2)
Suppose you want to save $1,000,000 for a retirement fund in 35 years. You anticipate making regular, end-of-month deposits in an annuity that pays 9% compounded monthly.
How much should you deposit each month? Use this formula:
How much of the $1,000,000 retirement fund comes from deposits and how much comes from interest?
Question 3)
Suppose that you decide to borrow $35,000 for a new car. You can select one of the following loans, each requiring regular monthly payments:
Installment Loan A: three-year loan at 6%
Installment Loan B: five-year loan at 9%.
- Find the monthly payments and the total interest for Loan A.
- Find the monthly payments and the total interest for Loan B.
- Compare the monthly payments and total interest for the two loans.
Use this formula to find the monthly payments:
(use the PMT formula)
(below are the formulas for questions 1 and 2)
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