Question

You had good intentions to start your savings plan when
you started your career. However, you decided you
needed a new car and needed to furnish your new
condo with all of the right "stuff" instead. Ten years went
by before you started your savings plan. Assuming the
same facts as in Question # 11 except you only have 20
years to save instead of 30 years.
How much will you have in your retirement account at
retirement?
a.	$261,600
b.	$409,281
c.	$759,618
d.	$190,460

11.	As you enter the workforce, you would like to start a
	systematic savings plan in order to have enough money
	to retire after 30 years of employment.
	Assume that your employers will pay annual bonuses
	of at least $ 8,000 per year. Also assume that you plan
	to put $8,000 per year into a savings account. Assume that
	you make that payment on the same date each year for
	30 years and that an interest rate of 9% will be earned.
	How much will you have in your retirement account at
	retirement?
	a.	$261,600
	b.	$409,281
	c.	$759,618
	d.	$1,090,460

Answer 1

Answer: Option-(b): $409,281 Workings: 9% 20 [30 - 10 = 20 years left for savings] $8,000 Annual Interest rate, RATE # of years of deposit, NPER Year-end deposits, PMT Initial deposit, PV Annual deposit type, TYPE Balance in account after 20 years $o 0 = 0 if deposited at the end of each year; Type = 1 if deposited at the beginning of each year $409,281 [Ref: NOTE] NOTE: Balance in account after 20 years is calculated using EXCEL FUNCTION FV(rate,nper,pmt,pv,type) where rate=9%; nper=20; pmt=-8000; pv=0; type=0; Here, value for pmt is negative as it denotes cash inflow; type=0 as deposits are made at the end of each year only. A 9% =30-10 [30 - 10 = 20 years left for savings] $8,000 1 Annual Interest rate, RATE 2 # of years of deposit, NPER 3 Year-end deposits, PMT 4 Initial deposit, PV 5 Annual deposit type, TYPE 6 Balance in account after 20 years $0 0 = 0 if deposited at the end of each year; Type = 1 if deposited at the beginning of each year =FV(B1,B2,-B3,B4,B5) [Ref: NOTE]