Question
You and your best friend are both 20 years old and recently graduated from a university to start well-paid jobs in Tharkiland. Since you have
You and your best friend are both 20 years old and recently graduated from a university to start well-paid jobs in Tharkiland. Since you have taken Dr. Zhous FINA 320, you decide to save for retirement as early as possible. You plan to contribute $10,000 to your retirement account every year until you are 45. After that, you will stop contribution and enjoy life. Your friend, on the other hand, would like to enjoy his life for the next 10 years after living like a pauper in college. However, he vows to start saving for retirement when he turns 30 and will contribute $10,000 to his retirement account every year until 67, when both of you will retire. Assume that both of you can earn an annual rate of return of 7%, who will have more money at retirement (i.e., when both of you are 67 years old) and by how much? Note that both of your annual contributions are made at the end of each year. A. Your friend will have $120,000 more than you. B. Your friend will have $970,883.64 more than you. C. You will have $1,198,812.45 more than your friend. D. You will have $1,688,869.84 more than your friend. E. None of the above.
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