Looking forward $-$ Future value

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 $$5,625\mathrm{.}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.

Future Value Factors

Excel

The following table shows the future value factors for various periods and interest rates:

Complete the following table by entering relevant values. Then use the table of future value factors to calculate the value of this nest egg.

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

You began saving at age $40.$ If you had started five years earlier, so that your funds would grow for

years, what would your nest egg be

worth, assuming the same interest rate and annual savings amount? $($Note: Round to two decimal places.$)$

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 either the table of future value factors, the future value formula, or your financial

calculator to calculate the value of this nest egg. $($Hint: Remember that the FVA factor is based on the new interest rate now.$)$

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.;