Question

U. LUU d ual inance for Life: Say. usiness and wants to 6-3. (Calculating the future value of an ordinary annuity) (Related to Finance for Life ing for Retirement on page 204) Mike, 30, has started a small business and we start saving for his retirement when he turns 65. He has decided to invest £6,000 end of every year in a pension plan that earns him 6 percent compounded annually How much will Mike get when he retires? Mike then decided to keep reinvesting the profits in his business for a further five Vear and start saving once he is 35 years old. How much will Mike get if he starts saving the same amount and investing in the same plan as before?

Answer 1

1.

Calculating Future Value,

Using TVM Calculation,

FV = [PV = 0, PMT = 6,000, N = 35, I = 0.06]

FV = $474,349.12

2.

Calculating Future Value,

Using TVM Calculation,

FV = [PV = 0, PMT = 6,000, N = 25, I = 0.06]

FV = $329,187.07