Question

Huey, Dewey and Louie are triplets.  They are 25 years old and are trying to set up savings plans for themselves.  They plan to retire at age 65.  They each have different ideas.  All APR’s are 4%.

Huey’s plan:  deposit $100 each month into the account and leave the money in the bank until he retires at age 65.  

Dewey’s plan:  Dewey doesn’t want to be bothered with monthly payments like Huey. He wants to hang onto his money throughout the year, and then make just one payment at the end of each year.  He’ll deposit $1200 per year in his bank.  He figures that at retirement his Nest Egg will be the same size as Huey’s because each year, he’s deposited just as much.  

Louie’s plan:  Louie’s a party guy!  He wants to have fun with his money while he’s young!   He decides he’ll put off saving until he’s 45, at which time he’ll start putting in twiceas much per month as Huey ($200).  He figures with this plan, his Nest Egg ought to be the same size as Huey’s when they retire at age 65.  (Twice as much for ½ the time ought to be the same, right?)

(a)  For each brother, you are to find/fill in the table below: # years saving, total deposits made, balance at age 65 using the TVM Solver, and the amount of interest earned.

	Huey	Dewey	Louie
# years saving
Total amount deposited ($) Show your work here.
Balance at age 65 (TVM)	N= I%= PV= PMT= FV= P/Y= C/Y= PMT: End   Balance:_________________	N= I%= PV= PMT= FV= P/Y= C/Y= PMT: End   Balance:_________________	N= I%= PV= PMT= FV= P/Y= C/Y= PMT: End   Balance:_________________

(b)  Did all 3 brothers make the same Total

Total Interest Earned ($) Show your work here.

(b)  Did all 3 brothers make the same Total Deposits?  _______________

       If not, which brother deposited the most? _______________

(c)  Did all 3 brothers earn the same amount of interest? _______________

       If not, which brother earned the most? _______________

(e)  What would Dewey’s annual deposit have to be to make as much as Huey? __________________

(f)  What would Louie’s monthly deposit have to be to make as much as Huey? __________________

(g)  What are the advantages/disadvantages of each brother’s savings plan?  Make at least 2 statements per brother.  Answers should be written in complete sentences with proper grammar and punctuation.

Huey:

Dewey:

Louie:

Answer 1

a]

Huey Dewey Louie 2 # years saving Total amount 3. deposited ($) Show your work 4 here. 5 Balance at age 65 6 (TVM) 48000 48000 48000 =40*12*100 =40*1200 =20*12*200 N= 40 N= 40 N= 20 1%= 4 1%= 4 1%= 4 PV= 0 PV= 0 PV= 0 PMT= -100 PMT= -1200 PMT= -200 FV= FV= FV= P/Y= 12 P/Y= 1 P/= 12 C/Y= 12 C/Y= 1 C/Y= 12 PMT: End PMT: End PMT: End Balance: Balance: Balance: $118,196.13 $114,030.62 $73,354.93

b]

yes, all 3 brothers made the same total deposits

c]

No, all 3 brothers did not earn the same amount of interest.

Interest earned = balance at age 65 - total amount deposited

Huey = $118,196.13 - $48,000 = $70,196.13

Dewey = $114,030.62 - $48,000 = $66,030.62

Louie = $73,354.93 - $48,000 = $25,354.93

e]

Dewey’s annual deposit have to be to make as much as Huey is calculated as :

N = 40

I% = 4

PV = 0

FV = 118196.13

P/Y = 1

C/Y = 1

CPT -> PMT

PMT is calculated to be $1,243.84

Dewey’s annual deposit to be to make as much as Huey is $1,243.84