The Solution to This Problem Requires Time Value of Money

question 54

Multiple Choice

The solution to this problem requires time value of money calculations. Reference to Tables 9-1 through 9-4 in the text is necessary to complete the calculations. David, a high school math teacher, wants to set up an IRA account into which he will deposit $2,000 per year. He plans to teach for 20 more years and then retire. If the interest on his account is 7% compounded annually, how much will be in his account when he retires?

• A) $81,990
• B) $74,458
• C) $ 4,800
• D) $21,118

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Definitions:

Agency

The fiduciary relationship that arises when one person consents to have another act on his behalf and subject to his control and the other consents to do so.

Power of Attorney

A legal document that grants one individual (the agent) the authority to act on behalf of another (the principal) in legal or financial matters.

Legal Documents

Legal documents are formal written records that are drafted and executed in accordance with legal requirements, often used to establish rights, obligations, or agreements.

Durable Power

A legal document that grants a designated individual the authority to make decisions on another's behalf, typically in financial or healthcare matters, and often remains in effect even if the grantor becomes incapacitated.