Question

13. You are planning to invest $7,000 in an account earning 10​% per year for retirement.

a. If you put the $7,000 in an account at age​ 23, and withdraw it 34 years​ later, how much will you​ have?

b. If you wait 10 years before making the​ deposit, so that it stays in the account for only 24 ​years, how much will you have at the​ end?

Answer 1

a) We are given the following information:

PMT	7000
r	10.00%
n	34
T	1

We need to solve the following equation to arrive at the required FV

(1+r)" - 1 FV = PMT

FV = 7000 x (1 + 0.1)34 - 1 0.1

FV = 1718336.89

So the FV is $1718336.89

b) We are given the following information:

PMT	7000
r	10.00%
n	24
T	1

We need to solve the following equation to arrive at the required FV

(1+r)" - 1 FV = PMT

FV = 7000 x (1 + 0.1)24 - 1 0.1

F = 619481.29

So the FV is $619481.29