Question

Lonny is 42 years old and starting an IRA (individual retirement account). He is going to invest $350 at the beginning of each month. The account is expected to earn 1.5% interest, compounded monthly. How much money, rounded to the nearest dollar, will Lonny have in his IRA if he wants to retire at age 62?
$97,890
$98,012
$48,909
$49,032

Answer 1

So you would start by taking 350 and adding 5.25(which is the 1.5 intrest for one month) * 12 ( how many months in a year ) for the first year that would be $4263.

Answer 2

wait a minute that's not right because if you times 4263 by 20 years you don't get your answer one second.

Answer 3

@Kyle220406 can you help me?

Answer 4

I got the same thing (4263 x 20)... does he even earn additional interest? @warrior2015 @starrhunter

Answer 5

That's what im thinking because how else would you get any of those numbers?

Answer 6

Exactly

Answer 7

So how would that even work? how would you even set up an equation? @Kyle220406

Answer 8

No idea I reworked it and I still came up with $355.25 a month, $4,263 a year, and $85,260 in 20 years.

Answer 9

WAIT would it earn another 1.5% ontop of the percent from the month before?

Answer 10

very true

Answer 11

I just did it its 98,012

Answer 12

@warrior2015

Answer 13

so b

Answer 14

Ha how did you get that??

Answer 15

I did the compound interest equation which adds the interest on each time.

Answer 16

ohhh hahah that would make sense!!! hahaha I cant believe I missed that I read the problem 5 times!!

Answer 17

I know hahaha compound was the key word of the whole equation

Answer 18

Haha wow we are so smart! thanks for the help ;) @starrhunter Does that answer your question?

Answer 19

No problem :)