Jolly Dolly Cupcakes continues to grow and Dolly comes to you and mentions that she is thinking about setting up a retirement account. She said the folks at the bank seem so nice, but she wonders whether the rates they offer on their IRA accounts are lower than current market rates. She tells you that her first option is to open up an IRA account with a $500 deposit. She plans to make monthly contributions of $500 for 10 years. The bank pays interest of 3% per annum, is compounded monthly, and this rate is locked in for 10 years. Her second option is to open a Wealth Management Account (WMA) with a deposit of $10,000. Dolly feels she can make quarterly contributions of $1,000 for 10 years. The interest rate of the WMA pays 4.25% is compounded annually and the rate is locked for 10 years.

Calculate the balances of the IRA account and Wealth Management Account at the end of the 10 year period.

Answer rating: 100% (QA)

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