Question
Assume that 25-year-old Denise wastes $10 per week buying lottery tickets, averaging $520 per year. Now let's assume that Denise sees the light and decides
Assume that 25-year-old Denise wastes $10 per week buying lottery tickets, averaging $520 per year. Now let's assume that Denise "sees the light" and decides to take that $520 she would have spent on lottery tickets and deposit it at the end of each year in an annuity paying 6% compounded annually.
By now, Denise is 45 years old. She's got a pretty good job, but she's starting to think about retirement and realizing that Social Security just isn't enough to live on after age 65. Since her IRA pays a little better interest than that 6% annuity paid, she decides to move all the 6% money into the IRA account with the other money. IRA account pays 7% compounded monthly.
a. How much total money does she begin with in the IRA account at this point?
Up to this point, Denise has been saving $1000 a year ($520+$480). Because she's making better money now, she wants to increase her investment in herself by putting $150 a month ($1800 a year) into the IRA account on top of the money that's already in there.
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