Question

Consider Amanda and Zelda. They both will save $6,000 per year until they retire at age 70. Amanda and Zelda, however, will start saving at different ages. Amanda will start saving when she is 30 years old. Zelda will start saving when she is 50 years old. Assuming the interest rate each year is 8%, how much money will the first year of savings amount to when they retire

Answer 1

Answer:

Total FV= $1,828,910.9

Explanation:

Giving the following information:

Amanda:

Annual deposit= $6,000

Number of periods= 40 years

Interest rate= 8%

Zelda:

Annual deposit= $6,000

Number of periods= 20 years

Interest rate= 8%

To calculate the future value, we need to use the following formula:

FV= {A*[(1+i)^n-1]}/i

A= annual deposit

Amanda:

FV= {6,000*[(1.08^40) - 1]} / 0.08

FV= $1,554,339.11

Zelda:

FV= {6,000*[(1.08^20) - 1]} / 0.08

FV= $274,571.79

Total FV= $1,828,910.9