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 5,000.00 per year via an annual, single year-end deposit. You are 40 years old now, so your money will grow for the next 25 years until you turn 65. You will open a savings account at the US Bank branch near your home. Its savings accounts are paying 6% Interest. The following table shows the future value factors for various periods and interest rates: Future Value of an Annuity Factor 3% 5% 6% 8% 2% 9% 10% Year 10 10.950 11.460 12.578 13.180 14.487 15.190 15.937 12 14.190 15.917 16.870 18.977 20.140 3.412 17.293 21.384 31.772 15 18.600 21.578 27.152 29.360 23.270 36.780 20 24.297 26.870 33.066 45.762 51.160 57.274 25 36.460 32.030 47.726 54.860 84.700 73.105 98.346 30 40.567 47.570 66.438 79.060 136.300 113.282 164,491 35 49.994 60.460 90.318 271.018 111.430 215.700 172.314 259.052 40 60.401 75.400 120.797 337.870 442.580 154.760 Complete the following table by entering relevant values. Then use the table of future value factors to calculate the value of this nest egg. Annual savings Years over which it will grow Interest rate Interest factor What will be the value of this money in 25 years? (Note: Round to two decimal places.) : You began savings at age 40. If you had started five years earlier, so that your funds would grow for worth, assuming the same interest rate and annual savings amount? (Note: Round to two decimal places.) years, what would your nest egg be Suppose that 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 remain the same? Complete the following table by entering relevant values. Then use the table of future value factors to calculate the value of this nest egg. (Hint: Remember that the IVA factor is based on the new interest rate now.) Annual savings word, assuring the same interest race and annual savings amount (Note: Round to CWU Weimai praces.) Suppose that 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 remain the same? Complete the following table by entering relevant values. Then use the table of future value factors to calculate the value of this nest egg. (Hint: Remember that the FVA factor is based on the new interest rate now.) 5 Annual savings Years over which it will grow Interest 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 for years? (Note: Round to two decimal places.) worth, assurnung the same interest rate and annual savings amou Suppose that a new bank in town offers 8% interest. How much that your funds are invested for 25 years and all other factors rer Complete the following table by entering relevant values. Then us Remember that the FVA factor is based on the new interest rate Annual savings Years over which it will grow Interest rate % Interes $566,410.00 $274,300.00 What wil this money in 25 years? (Note: Round $365,525.00 Again, if your savings program five years earlier, $395,300.00 higher ir annual savings amount remains the sam places.) my
