Edward Johnson decided to open up a Roth IRA. He will invest $1,800 per year for the next 35 years. Deposits to the Roth IRA will be made via a $150 payroll deduction at the end of each month. Assume that Edward will earn 8.75% annual interest compounded monthly over the life of the IRA. How much will he have at the end of 35 years?
A) $125,250
B) $250,321
C) $363,000
D) $414,405
Suppose that you wish to save for your child's college education by opening up an educational IRA. You plan to deposit $100 per month into the IRA for the next 18 years. Assume that you will be able to earn 10%, compounded monthly, on your investment. How much will you have accumulated at the end of 18 years?
A) $21,600
B) $54,719
C) $33,548
D) $85,920
E) $60,056
What is a series of equal payments for a finite period of time called?
A) A perpetuity
B) An axiom
C) A lump sum
D) An annuity
Which of the following statements is true?
A) The future value of an annuity would be greater if funds are invested at the beginning of each period instead of at the end of each period.
B) An annuity is a series of equal payments that are made, or received, forever.
C) The effective annual rate (APR) of a loan is higher the less frequently payments are made.
D) The future value of an annuity would be greater if funds are invested at the end of each period rather than at the beginning of each period.
What is a series of equal payments to be received at the end of each period, for a finite period of time, called?
A) A perpetuity
B) An annuity due
C) A cash cow
D) A deferred annuity
