Problem 1. (6 points)

You can deposit up to $6,500 in a Roth Individual Retirement Account (Roth IRA) before the

age of 50 and $7,500 if you are 50 or older. In a Roth IRA, taxes are paid on the income in the

year it is earned, but the withdrawals from the account after age 65 are not taxed.

(a) Assume the maximum investment amount is constant, and that you made the maximum

investment from ages 25 until 49, and then you didn't invest another dime after age 49. How

much would your account be worth when you were 75 assuming a 7% annual interest rate

compounded annually?

(b) Now assume that you didn't start investing until you were 50, and you made the maximum

investment until age 75. How much would your account be worth when you were 75 assuming a

7% annual interest rate compounded annually?