ANSWER:
Since calculations are long and complex , the problem has been solved in excel.
year | 0 | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 10 | 11 | 12 | 13 | 14 | 15 | 16 |
salary | 100,000 | 104000 | 108160 | 112486.4 | 116985.9 | 121665.3 | 126531.9 | 131593.2 | 136856.9 | 142331.2 | 148024.4 | 153945.4 | 160103.2 | 166507.4 | 173167.6 | 180094.4 | |
money put in mutual fund | 18000 | 18720 | 19468.8 | 20247.55 | 21057.45 | 21899.75 | 22775.74 | 23686.77 | 24634.24 | 25619.61 | 26644.4 | 27710.17 | 28818.58 | 29971.32 | 31170.18 | 32416.98 | |
present worth | $156,257.14 | ||||||||||||||||
future worth | $957,917.79 |
so at the end of 16 years , the money accumulated will be $957,917.79
we find present worth in excel using the npv function and future worth using the fv function
pw = npv(rate,all the cash flows from year 1 to year 16)
pw = npv(12%,all the cash flows from year 1 to year 16)
fw = -fv(rate,nper,pmt,pv,type)
fw = -fv(12%,16,,156,257.14)
fw = $957,917.79
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