Question

You want to compare two separate retirement savings​ scenarios: (A) and​ (B). In scenario​ (A) you start​ immediately, contribute for a few​ years, but then stop contributing.​ However, you leave the accumulated savings to compound until retirement. In scenario​ (B) you start later​ (after the end of savings in scenario​ A) and contribute all the way to retirement. Calculate the accumulated amount of savings at retirement for the two scenarios.

A:____    (Round to the nearest cent.)

B:____    (Round to the nearest cent.)

Solve using Excel and show all formulas.

Answer 1

Question
Information in the Question
Scenario	Annual Payment	Payment Period	Total Number of Payment	Length of Investment	Interest Rate
A	$                4,000.00	End of years 1 to 13	13	33 years	7%
B	$                4,000.00	End of years 14 to 33	20	33 years	7%

Compound Interest Method

A=P(1+r)^t

A= Future Value including Interest

P= Principal investment

r= annual rate

t= time

Accumulated amount of savings at retirement in Scenario A = 333,574

Accumulated amount of savings at retirement in Scenario B = 509,035

Compound Interest Method Scenarlo Year 6.034 Previous Year Amount (5) Total Amount for Rate of End Amount Interest (5) Total Savings Interest interest =Amount ($ +Previous Savings Total Savings =(Amount (5)+Previous Year End =Total Amount for Year End Amount Amount]* Rate of interest Interest+Interest (5) 4.000 4.000 280 4.280 4.000 4 280 8.2801 580 8. 80 4.00 3.560 12.850 9001 13.760 Anal 13 750 12 19.00 4.000 19.003 23.003 1.6101 24.53 4.00 24,613 28.53 2003 30.515 4.001 30.616 34.516 2.4231 37.039 4.000 37.039 41039 2.8731 433912 4.000 43.9171 47.912 3.354 51.255 51 2651 55.255 3.859 59.134 59.134 63.14 4.4191 67.554 401 67.554 71.554 5.009 75.563 75.5.631 ESE 5.69 85.202 25 202 85.2 oz 92.236 97 736 92 735 6.4571 GR 98.593 98.593 6.90 105.501 105 501 105.501 7.392| 112.993 112 993 112 993 7.9101 120.903 120.903 120.903 179365 179.366 179.3651 9.056 138.421 138 421 138 421 9.690 148 uul JAR 1 1 AR111 10 35R 158 479 158 479 158 479 11094 169572 169 572 169572 11.8701 181 442 181 442 181 4421 12.701 194 143 194 143 194 143 13.5901 207.733 207.733 207.733 14.5411 222 275 222 275 222 275 15.3591 237.834 7374 7374 16.648 754 4821 754 482 754.482 17.8141 272.295 272 295 272.295 7% 19.0511 791 357 7913571 72 20.395 311.7521 311 752 311.752 21.823) 333 574 Accumulated amount of savings at retirement In Scenarlo A = 333,574

Compound interest Method Amount (5) Rate of interest Interests) Total Sevings Previous Year End Total Amount for interest Amount Amount Previous Total Savings Year End Amount Saving Amount (S) Previous Year End AmountRate of interest otal Amount for interest interest (S) · 4444 4.8 19.003 30.515 239 17 4.000 99.134 4.8 102112 19351 4.000 4.8 10.455 4 444444444444444444444 4.000 4.000 229.707 16259 1229 | 4.000 1 4.000 4.0 in Scenario B =509,035