Question

1. You deposit $400 each month into an account earning 7% interest compounded monthly.

a) How much will you have in the account in 35 years?

$

b) How much total money will you put into the account?

$

c) How much total interest will you earn?

$

2. Suppose you want to have $300,000 for retirement in 35 years. Your account earns 8% interest.

a) How much would you need to deposit in the account each month?

$

b) How much interest will you earn?

$

3. You want to be able to withdraw $20,000 each year for 20 years. Your account earns 10% interest.

a) How much do you need in your account at the beginning?

$

b) How much total money will you pull out of the account?

$

c) How much of that money is interest?

$

Answer 1

Gowtion Given 1) you deposite $400 each month into an account interes 72 Compounded monthly a) you have in the account in 35 years Altijn 10: : 1 A - $400 7% 0.07 20.0058 12 12 35 years 35X12 = 420 months n 400) (01.0058)420 420 ] 400 e 0.0058 (1.0058) 0.00998 713943.6 amount have in the account in 35 years -$713543.6 b) Total money will you put into account 2 400 x 35 x12 = $168000

Interest will you earn amount in 35 years I T Total money $ 713593.6 - $ 168000 - $545593.6 Interest earned $ 545593.6 I 2) Given you want to have $ 300,000 for retire ment in 35 years your account earns 8 % interest d (1+i) *k - ) p = (i) P = $300,000 t = 8% 12 0.08 -0.0067 12 (61+0.00 67) "20) = 35 years 420 nxk 35X12 = 420 300 000 0.0067 300 000 X 0.0067 it 0.0067) 420, 1)

d 2010 (L+0.0067) 420 -1 d = $129.5 b) interest will you earns $ 300000 (129.5 * 12X35) $ 300000 94390 Interest earned $ 245610

3) Given with drow $20,000 each year fog 20 years interest 10% a) you need in your account at the beginning payout annuity Formula PMT (1*(1+ (*)") Po Po 20000 (- 61+ 0.10 )** *20 (910) Po $170271.3 b) will you pull out of the Total money account $20,000 x 20 $400000 c) money is interest 40,0000 170271.3 - $ 229728.7