Bola has accumulated $50,000 in her thrift savings plan at her job at the Federa
ID: 2481869 • Letter: B
Question
Bola has accumulated $50,000 in her thrift savings plan at her job at the Federal Aviation Administration. The government puts in 1% of her pay and matches up to another 4% if she puts in 5% out of her pay.
Bola earns $90,000 a year and plans to add 5% from her income plus the agency 5% for a total of $9,000 per year.
Her cousin Eugene says that if she invests in stocks, she can earn 12% per year because that has been the long term history. How much will she have in 25 years at retirement if she can earn 12% per year compounded annually?
In excel-what function should be used to calcualte
Explanation / Answer
The investment per year is $9000
The discount rate is 12%
The value of investment at the end of 25 years will be
The formula to be used is P*(1+r)^n
This has to be done for each investment made.
If Bola invests the existing thrift savings also into stocks, the return from that will be
50000 * (1.12)^25 = $850000
Year Invstement Value of Investment 1 9000 153000.5797 2 9000 136607.6604 3 9000 121971.1254 4 9000 108902.7905 5 9000 97234.63438 6 9000 86816.63784 7 9000 77514.85521 8 9000 69209.69216 9 9000 61794.368 10 9000 55173.54285 11 9000 49262.09183 12 9000 43984.01057 13 9000 39271.438 14 9000 35063.78393 15 9000 31306.94994 16 9000 27952.63388 17 9000 24957.70882 18 9000 22283.66859 19 9000 19896.13267 20 9000 17764.40417 21 9000 15861.07515 22 9000 14161.67424 23 9000 12644.352 24 9000 11289.6 25 9000 10080 1344005.41