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For the three-part question that follows, provide your answer to each part in the given workspace. Identify...

For the three-part question that follows, provide your answer to each part in the given workspace. Identify each part with a coordinating response. Be sure to clearly label each part of your response as Part A, Part B, and Part C.
Use the information below to answer Part A, Part B, and Part C.
At 40, Jenna sets up an IRA in which she plans to deposit $2,500 per year at the end of the year until she is 70 years old. Her funds will earn 7% interest compounded annually, and the factor for her annuity is 94.46079.
Part A: Determine the length of the IRA.
Part B: How much will be in Jenna's account when she is 70 years old?
Part C: Show your work to support your answer to Part B.

Answer

  1. Part A:

    The length of the IRA is the number of years from age 40 to age 70, which is 30 years.

  2. Part B:

    The amount in Jenna's account when she is 70 years old can be calculated using the formula for the future value of an annuity: Future Value = Payment × Annuity Factor. Therefore, Future Value = $2,500 × 94.46079 = $236,151.98.

  3. Part C:

    To support the answer to Part B, the calculation is as follows: Future Value = $2,500 (annual deposit) × 94.46079 (annuity factor for 30 years at 7% interest) = $236,151.98. This shows the total amount accumulated in the IRA after 30 years of deposits and compounded interest.

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