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31 March, 13:51

At 50, Brian sets up an IRA, where he plans to deposit $12,000 at the end of each year until age 75. Find the amount of the annuity if he invests in a stock fund that yields 4% compounded annually.

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  1. 31 March, 13:57
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    Answer: the amount of the annuity is $501000

    Step-by-step explanation:

    We would apply the future value which is expressed as

    FV = C * [{ (1 + r) ^n - 1}/r]

    Where

    C represents the yearly payments.

    FV represents the amount of money

    in your account at the end of 25 years.

    r represents the annual rate.

    n represents number of years or period.

    From the information given,

    r = 4% = 4/100 = 0.04

    C = $12000

    n = 75 - 50 = 25

    Therefore,

    FV = 12000 * [{ (1 + 0.04) ^25 - 1}/0.04]

    FV = 12000 * [{2.67 - 1}/0.04]

    FV = 12000 * 41.75

    FV = $501000
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