You invest $1000 a year into a retirement account that earns four percent interest annually. How much is the account worth after 20 years?
To calculate the future value of the retirement account after 20 years, we can use the formula for compound interest:
FV = PV x (1 + r)^n
Where:
FV = future value of the account
PV = present value of the account ($1000)
r = annual interest rate (4% or 0.04)
n = number of years (20)
Plugging in the values, we get:
FV = $1000 x (1 + 0.04)^20
FV = $1000 x (1.04)^20
FV = $1000 x 2.191058
FV = $2191.06
Therefore, the retirement account would be worth approximately $2,191.06 after 20 years.