A. Liam decided to save $3,000 at the end of each year (for 5 years) by investin
ID: 2901365 • Letter: A
Question
A. Liam decided to save $3,000 at the end of each year (for 5 years) by investing in an account that paid 10.0% compounded annually. At the end of this time he took all of the accumulated money out of his account and makes a one-time lump sum investment into the companies account that pays 9.0% compounded annually and leaves it there for his entire 37 year career. How much money does John have in total when he finally retires?
B. Peyton, on the other hand, procastinates. She makes no investments at all while in school, but decides to invests $3,000 at the end of each year into the companies account for each of her 37 year career also. How much money does she have when she finally retires?
If I can get a walk through that would be amazing. Thank you
Explanation / Answer
A
Amount accumulated after 5 years:
= 3000*FVA(10%,5)
= 3000*6.1051
= $18315.30
This amount is invested for 37 years at 9%.
Amount accumulated
= 18315.30*FV(9%,37)
= 18315.30*24.2538
= 444,215.62
THUS, AMOUNT ACCUMULATED IS $444,216
B
The amount accumulated will be
= 3000*FVA(9%,37)
= 3000*258.3759
= 775,127.84
THUS, AMOUNT ACCUMULATED IS $775,128