Homework Answers
ANSWER:
Since the calculations are extremely long i have solved in excel.
| year | 0 | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 10 | 11 | 12 | 13 | 14 | 15 | 16 | 17 | 18 | 19 | 20 | 21 | 22 | 23 | 24 | 25 | 26 | 27 | 28 | 29 | 30 |
| salary increase each year at 5% | 68000 | 71400 | 74970 | 78718.5 | 82654.425 | 86787.14625 | 91126.50356 | 95682.82874 | 100466.9702 | 105490.3187 | 110764.8346 | 116303.0764 | 122118.2302 | 128224.1417 | 134635.3488 | 141367.1162 | 148435.472 | 155857.2456 | 163650.1079 | 171832.6133 | 180424.2439 | 189445.4561 | 198917.729 | 208863.6154 | 219306.7962 | 230272.136 | 241785.7428 | 253875.0299 | 266568.7814 | 279897.2205 | |
| savings 8% of salary | 5440 | 5712 | 5997.6 | 6297.48 | 6612.354 | 6942.9717 | 7290.120285 | 7654.626299 | 8037.357614 | 8439.225495 | 8861.18677 | 9304.246108 | 9769.458414 | 10257.93133 | 10770.8279 | 11309.3693 | 11874.83776 | 12468.57965 | 13092.00863 | 13746.60906 | 14433.93952 | 15155.63649 | 15913.41832 | 16709.08923 | 17544.54369 | 18421.77088 | 19342.85942 | 20310.00239 | 21325.50251 | 22391.77764 | |
| pv at 3% (using npv function) =npv(rate,savings from year 1 to year 30) | 212318.59 |
Now we will the fv at 30 years.
1) fv = pv(f/p,i,n)
fv = 212,318.59(f/p,3%,30)
fv = 212,318.59 * 2.43
fv = $515,352.93 or $515,353
2) value in year 1 dollars:
n = 29 (30 - 1)
i = 2.5% (inflation)
pv = fv(p/f,i,n)
pv = 515,353(p/f,2.5%,29)
pv = 515,353 * 0.4886
pv = $251,826
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