Annual rate of return

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It is December 20th and you just met with your financial advisor, who suggested that you begin putting $5,000 into a Roth IRA at the beginning of each year, starting next month.

Your advisor says that, although there is no guarantee, you could average an annual return of 8% over the next twenty (20) years with the right mix of investments. You want to know just how big of a "nest egg" you can create if you take her advice and then actually average an 8% annual rate of return.

(A) How big will your nest egg be at the end of the year in which you make your 20th annual contribution?

(B) How big will your nest egg be at the end of the year in which you make your 20th annual contribution if you invest at the end of each year instead of at the beginning of each year as your advisor recommends?

Reference no: EM131928488

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