A friend creates an IRA (Individual retirement account) with an APR of 6.25%. She starts the IRA at the age of 25 and deposits $50 at the end of each month. How much will her IRA contain when she retires at the age of 65?

Because deposits are made at the end of each month, use the future value formula for an ordinary annuity: $50 × [((1 + 0.0625/12)^480 − 1)/(0.0625/12)]. There are 40 × 12 = 480 monthly deposits, and the monthly interest rate is 0.0625/12. The calculation gives about $106,595.63, so the IRA will contain approximately $106,595.63, choice B.

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