Question

6-3. Calculating the future value of an ordinary annuity) (Related to Finance for Life: Sa ing for Retirement on page 204) Mike, 30, has started a small business and wants to start saving for his retirement when he turns 65. He has decided to invest £0,000... end of every year in a pension plan that earns him 6 percent compounded annan How much will Mike get when he retires? Mike then decided to keep reinvesting the profits in his business for a furie and start saving once he is 35 years old. How much will Mike get if he stars same amount and investing in the same plan as hefore? usiness for a further five years get if he starts saving the

Answer 1

Age	Amount	FV Factor	Future Value
31	6,000	7.251	43,506.15
32	6,000	6.841	41,043.54
33	6,000	6.453	38,720.32
34	6,000	6.088	36,528.60
35	6,000	5.743	34,460.95
36	6,000	5.418	32,510.33
37	6,000	5.112	30,670.12
38	6,000	4.822	28,934.08
39	6,000	4.549	27,296.30
40	6,000	4.292	25,751.22
41	6,000	4.049	24,293.61
42	6,000	3.820	22,918.50
43	6,000	3.604	21,621.22
44	6,000	3.400	20,397.38
45	6,000	3.207	19,242.81
46	6,000	3.026	18,153.60
47	6,000	2.854	17,126.03
48	6,000	2.693	16,156.64
49	6,000	2.540	15,242.11
50	6,000	2.397	14,379.35
51	6,000	2.261	13,565.42
52	6,000	2.133	12,797.57
53	6,000	2.012	12,073.18
54	6,000	1.898	11,389.79
55	6,000	1.791	10,745.09
56	6,000	1.689	10,136.87
57	6,000	1.594	9,563.09
58	6,000	1.504	9,021.78
59	6,000	1.419	8,511.11
60	6,000	1.338	8,029.35
61	6,000	1.262	7,574.86
62	6,000	1.191	7,146.10
63	6,000	1.124	6,741.60
64	6,000	1.060	6,360.00
65	6,000	1.000	6,000.00
			668,608.68

Since he will contribute at the end of each year, the first payment of 6,000 shall be compounded for 34 years (from age 31 till age 65)

In case of second scenario

Age	Amount	FV Factor	Future Value
36	6,000	5.743	34,460.95
37	6,000	5.418	32,510.33
38	6,000	5.112	30,670.12
39	6,000	4.822	28,934.08
40	6,000	4.549	27,296.30
41	6,000	4.292	25,751.22
42	6,000	4.049	24,293.61
43	6,000	3.820	22,918.50
44	6,000	3.604	21,621.22
45	6,000	3.400	20,397.38
46	6,000	3.207	19,242.81
47	6,000	3.026	18,153.60
48	6,000	2.854	17,126.03
49	6,000	2.693	16,156.64
50	6,000	2.540	15,242.11
51	6,000	2.397	14,379.35
52	6,000	2.261	13,565.42
53	6,000	2.133	12,797.57
54	6,000	2.012	12,073.18
55	6,000	1.898	11,389.79
56	6,000	1.791	10,745.09
57	6,000	1.689	10,136.87
58	6,000	1.594	9,563.09
59	6,000	1.504	9,021.78
60	6,000	1.419	8,511.11
61	6,000	1.338	8,029.35
62	6,000	1.262	7,574.86
63	6,000	1.191	7,146.10
64	6,000	1.124	6,741.60
65	6,000	1.060	6,360.00
			502,810.06