Asked Nov 3, 2019

Debbie invests $5,500 in her IRA account each year for 40 years.  If she earns 7% return annually on her IRA account, what will her investment grow to in 40 years? 


Expert Answer

Step 1

We need to use the concept of time value of money to solve the question. According to the concept of time value of money, the value of money available at the present time is more compared to the same sum in some future time. This is because of the earning potential of money, which means, we can earn interest on money by investing.

Step 2

Given that the annual payment is $5500
Present value of the investment is zero
Time period is 40 years
Annual rate of return is 7%
We need to calculated the future value of the investment.

Step 3

We will use excel to determine the fu...

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