Assume an annual 6% return and annual compounding if Tara saves $2000 a year for 40 years how much money would she have at the end?
what is
2000( 1.06^40 - 1)/.07 ?
To calculate the total amount of money Tara would have at the end of 40 years with an annual 6% return and annual compounding, you can use the formula for compound interest:
A = P(1 + r/n)^(nt)
Where:
A = the final amount of money
P = the principal (initial amount), which is $2000 per year
r = the annual interest rate in decimal form, which is 6% or 0.06
n = the number of times compounding occurs per year, which is 1 for annual compounding
t = the number of years, which is 40
Plugging in these values into the formula, we have:
A = 2000(1 + 0.06/1)^(1*40)
Simplifying it further:
A = 2000(1 + 0.06)^40
Calculating:
A ≈ 2000(1.06)^40
Using a calculator or a spreadsheet, we find that:
A ≈ $311,250.94
So, after 40 years of saving $2000 annually with a 6% annual return and annual compounding, Tara would have approximately $311,250.94 at the end.