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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881

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BuyFindarrow_forward

Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881
Textbook Problem
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Use Future Value and Present Value Tables to Apply Compound Interest to Accounting Transactions

Chuck Russo, a high school math teacher, wants to set up an IRA account into which he will de posit $2,000 per year. He plans to teach for 20 more years and then retire.

Required:

If the interest on his account is 7% compounded annually, how much will be in his account when he retires? (Note: Round answers to two decimal places.)

To determine

Concept introduction:

Time value of money:

Time value of money is the concept that differentiates the value of money received today and the value of same money received in future. According to this concept, the same amount of money to be received in future shall have lower present value (value of the money today) due to the interest that could be earned on that money.

To calculate:

The future value.

Explanation

The future value is calculated as follows:

Annuity Amount (A) $ 2,000
Annual return % 7%
Number o...

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