4)
ack decided to put $500 into an IRA account every 3 months at a rate of 6% compounded quarterly. Find
a recursive formula that represents his balance at the end of each quarter. How many years will it be
before the value of the account is $100,000? What will be the balance in 30 years when Jack retires?
A) B0 = 500, Bn = 1
+ 0.06
4B(n – 1) + 500; 24 years; $168,129
B) B0 = 500, Bn = 1
+ 0.06
3B(n – 1) + 500; 27 years; $126,050
C) B0 = 500, Bn = 1
+ 0.6
4B(n – 1) + 500; 24 years; $168,129
D) B0 = 500, Bn = 1
+ 0.6
3B(n – 1) + 500; 27 years; $126,050
5) After working for 25 years you would like to have $600,000 in an annuity for early retirement. If the
annual interest rate is 7.5%, compounded monthly, what will your monthly deposit need to be?
A) $683.95 B) $2080.03 C) $839.58 D) $1373.90
6) To save for retirement, you decide to deposit $1500 into an IRA at the end of each year for the next 40
years. If the interest rate is 7% per year compounded annually, find the value of the IRA after 40 years.
Round to the nearest dollar.
A) $299,453 B) $20,962 C) $278,460 D) $4,618,809
7) Looking ahead to retirement, you sign up for automatic savings in a fixed–income 401K plan that pays 5%
per year compounded annually. You plan to invest $2000 at the end of each year for the next 30 years.
How much will your account have in it at the end of 30 years? Round to the nearest dollar.
A) $132,878 B) $134,648 C) $131,335 D) $134,176
8) Kurt deposits $200 each month into an account paying annual interest of 7% compounded monthly. How
much will his account have in it at the end of 11 years? Round to the nearest dollar.
A) $39,598 B) $3157 C) $39,444 D) $39,727
9) Domenica invests $200 each quarter in a fixed–interest mutual fund paying annual interest of 7%
compounded quarterly. How much will her account have in it at the end of 6 years? Round to the nearest
dollar.
A) $5902 B) $1431 C) $17,678 D) $6031
10) You deposit $150 every 6 months into an annuity with an annual interest rate of 8%
compounded
semiannually. What is the balance after 20 years? What is the balance after 40 years?
A) $14,253.83; $82,686.75 B) $4466.71; $82,686.75
C) $4466.71; $14,253.83 D) $14,253.83; $38,858.48
11) Christine contributes $250 each month to her 401(k). To the nearest dollar, what will be the value of
Christine’s 401(k) in 20 years if the per annum rate of return is assumed to be 10% compounded monthly.
Round to the nearest dollar.
A) $189,842 B) $66,390 C) $62,096 D) $178,851
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