CH3.8. Future Value of Annuity. Twins Jacinta and Juan graduated from college an
ID: 2637900 • Letter: C
Question
CH3.8. Future Value of Annuity. Twins Jacinta and Juan graduated from college and started working in the family restaurant business at age 25. Each sibling decided upon a different course of action for their respective retirement plans. Assuming each plan earned 10% and both siblings retired at age 65, calculate the earnings each plan generated.
Jacinta began immediately to put $3,500 per year in an individual retirement account and contributed to it for a total of 10 years. After 10 years, she made no further contributions into the account.
Juan did not open an individual retirement account until he was 35. Juan
Explanation / Answer
a>Jacinta' Contribution=3500*10 35000 b>Juan's Contribution=2900*(65-35) 87000 c>Jacinta's Annuity Future Value(A=35000,I=10%,N=10Years)=15.937*35000 557795 d>Janes Annuity Future Value=FV(A=2900,N=40,I=10%) -FV(A=2900,N=10,I=10%) Interest Factor=(1.10^40) 45.26 Interest Factor=(1.10^10) 2.59 FV(When N=40)=2900*(F-1)/i=2900*(45.26-1)/0.10 1283540 FV(When N=10)=2900*(F-1)/i=2900*(2.59-1)/0.10 46110 So Janes FV=1283540-46110 1283540