Answer to Question #244954 in Economics for Zia

Question

Assume that when you are 25 years old you plan to aggressively save for your retirement by contributing $5,000 a year to a tax-sheltered account. A relative of yours tells you to forget about earning 10 percent or more a year because that is very unlikely to happen (which is true). He also tells you that you should not worry too much about whether you earn, for example, 6 or 7 percent, because it won't make a lot of difference in your final wealth. You decide to see for yourself the various results that could occur by doing some calculations.

a. Fill in the spreadsheet below with the combinations indicated. Determine the difference in outcomes between 9 percent for 40 years and 10 percent for 40 years.

b. Calculate the difference between earning 6 percent and earning 7 percent for 20, 30, and 40 years. How would you respond to your relative? 

    5% 6% 7% 8% 9% 10% 

20 yrs

25 yrs

30 yrs

35 yrs

40 yrs 

Answer 1

Dear Zia, your question requires a lot of work, which neither of our experts is ready to perform for free. We advise you to convert it to a fully qualified order and we will try to help you. Please click the link below to proceed: Submit order