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An accountant decided to open an IRA for her retirement. She planned to deposit $5,000 at the end of the first year. Then she planned to skip the payment for the 2nd year and make the $5,000 deposit every other year. In other words, she deposits her $5,000 every  2nd. year, so that in 30 years she will have made a total of 15 deposit. If she is able to earn 6% compounded annually, what would the balance in her IRA be in 30 years?
Thanks for any help.

deposits end of 1{,3,5,7,9,11,13,15,17,19,21,23,25,27, 29}.    yes that is 15 deposits

 

 

6% annually = is what in 24 months?

\((1+0.06)^2=(1+x)^1\\ 1.06^2-1=x\\ x=0.1236=12.36\% \;\;every \;\;2\;\; years \)

 

I think I will add in the first payment later.  So I am starting at the end of year 1 but not including the first payment.

 

So I am going to start just after  the 1st payment is mad at the end of year 1 and finish just after the 15th deposit is made at the end of year 29.

So I will have to add the last years interest later too.

So that is (14 deposits made at the end of each 2 years + the first year will be invested for 28 years,) then the amount that totals will be invested for 1 more year.

14 deposits made at the end of each 2 years=

\(5000*\frac{(1.1236^{14}-1)}{0.1236}\)

 

1 deposit is in the bank for 28 years will grow to     5000*0.0628

 

So I think the answer is       ((5000*(1.1236^14-1)/0.1236)+5000*1.06^28)*1.06 = $203,402.13

 

That seems like an awful lot but it could be correct.

If you used a formua for future value of an anuity due formula it would  be easier but not everyone is supposed to use that formula.

Jul 17, 2016
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