Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

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

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 $5,875.00 per year via an annual, single year-end deposit. You are 35 years old now, so your money will grow for the next 30 years until you turn 65. You will open a savings account at the Wells Fargo 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:

image text in transcribedimage text in transcribed

\begin{tabular}{llllllll} \hline \multicolumn{7}{c}{ Future Value of an Annuity Factor } \\ Year & 2% & 3% & 5% & 6% & 8% & 9% & 10% \\ \hline 10 & 10.950 & 11.460 & 12.578 & 13.180 & 14.487 & 15.190 & 15.937 \\ 12 & 13.412 & 14.190 & 15.917 & 16.870 & 18.977 & 20.140 & 21.384 \\ 15 & 17.293 & 18.600 & 21.578 & 23.270 & 27.152 & 29.360 & 31.772 \\ 20 & 24.297 & 26.870 & 33.066 & 36.780 & 45.762 & 51.160 & 57.274 \\ 25 & 32.030 & 36.460 & 47.726 & 54.860 & 73.105 & 84.700 & 98.346 \\ 30 & 40.567 & 47.570 & 66.438 & 79.060 & 113.282 & 136.300 & 164.491 \\ 35 & 49.994 & 60.460 & 90.318 & 111.430 & 172.314 & 215.700 & 271.018 \\ 40 & 60.401 & 75.400 & 120.797 & 154.760 & 259.052 & 337.870 & 442.580 \\ \hline \end{tabular} 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 30 years? (Note: Round to two decimal places.) You began saving at age 35. 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 30 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.) te: Round to two decimal places.) ars earlier, what would your nest egg be worth, assuming that your funds were invested it remains the same, and the funds are invested for years? (Note: Round to

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Real Estate Finance And Investment

Authors: Terrence M. Clauretie, G. Stacy Sirmans

8th Edition

1629809942, 9781629809946

More Books

Students also viewed these Finance questions