Question

There are 2 students, A and B. They deposit money $1,000 every month. Interest 8% both decide to retire at 60 years. A start saving at 30 years and B start saving at 35 years.

1. How much money A and B will have at 60 years?

2. What is percentage differential between A and B?

Answer 1

1)	For A
	Future Value of an Ordinary Annuity
	= C*[(1+i)^n-1]/i]
	Where,
	C= Cash Flow per period
	i = interest rate per period
	n=number of period
	= $1000[ (1+0.0066666666)^360 -1 /0.0066666666]
	= $1000[ (1.0066666666)^360 -1 /0.0066666666]
	= $1000[ (10.9357 -1] /0.0066666666]
	= $14,90,359.42
	For B
	Future Value of an Ordinary Annuity
	= C*[(1+i)^n-1]/i]
	Where,
	C= Cash Flow per period
	i = interest rate per period
	n=number of period
	= $1000[ (1+0.0066666666)^300 -1 /0.0066666666]
	= $1000[ (1.0066666666)^300 -1 /0.0066666666]
	= $1000[ (7.3402 -1] /0.0066666666]
	= $9,51,026.38
2)	Percentage difference
	A Earned = ($1490359.42-360000)/360000
	=313.99%
	B Eanred = ($951026.38-300000)/300000
	=217.01%
	Percentage difference = 313.99% -217.01%
	=96.98%