Compounding Interest

You know that paying yourself (by depositing money in a savings account) is a prudent start to your retirement plan. You determined that, based on your other obligations, you can save 7,000.00 per year via an annual, single year-end deposit. Let's say that you are age 40 now, so your money will grow for the next 25 years until you reach age 65. You will open a savings account at the US Bank branch near your home. Its savings accounts are paying 6% interest.

Year2%3%5%6%8%9%10%1010.95011.46012.57813.18014.48715.19015.9371213.41214.19015.91716.87018.97720.14021.3841517.29318.60021.57823.27027.15229.36031.7722024.29726.87033.06636.78045.76251.16057.2742532.03036.46047.72654.86073.10584.70098.3463040.56747.57066.43879.060113.282136.300164.4913549.99460.46090.318111.430172.314215.700271.0184060.40175.400120.797154.760259.052337.870442.580To calculate the value of this nest egg, enter the data provided by entering the correct value in the applicable entry field.

Annual savingsYears over which it will growInterest rate%Interest factor

What will be the value of this money in 25 years? (Note: Round to two decimal places.)

You began your savings program at age 40. If you had started five years earlier, such that your funds would grow foryears, what would your nest egg be worth, assuming the same interest rate and annual savings amount? (Note: Round to two decimal places.)

A new bank in town offers 8% interest. How much would your yearly deposits be worth if you open a savings account there, assuming that your funds are invested for 25 years and all other factors staying the same?

To calculate the revised value of your nest egg, reenter the provided data, remembering to change the FVA factor based on the change in interest rate.

Annual savings$Years over which it will growInterest rate%Interest factor

What will be the value of this money in 25 years? (Note: Round to two decimal places.)

Again, if you had started your savings program five years earlier, what would your nest egg be worth, assuming that your funds were invested at this higher interest rate, the annual savings amount remains the same, and the funds are invested foryears? (Note: Round to two decimal places.)