Answer to Question #158399 in Financial Math for Minah

Question

STORY (very similar to what was shown in class): YOU and your BEST FRIEND just graduated from college. You both went to the same college and majored in the same field. You both started working at age 22 in the same workplace. Each of you decided upon a different course of action for your respective retirement plans. Assuming each plan earned 10% and both of you decided to retire at age 60, calculate the earnings each plan generated.

Upon the advice of your Personal Finance professor (hint, hint), YOU began immediately putting $6,000 per year in an individual retirement account (IRA) and $19,500 per year in a 401K. You contributed for a total of 15 years. After 15 years, you made no further contributions into the account.

Your BEST friend, did not contribute to their retirement accounts until they turned 30, even though you both worked in the same place and received the same plans. They had planned to simply invest $6000 and $19,500 each year for the remaining years until they retired at age 60.

1.      How much did You contribute OUT of pocket in total into your plan?

2.     How much did your BEST FRIEND contribute OUT of pocket in total into their plan?

3.     How much did You accumulate in Your retirement account with interest?

ANSWER: This answer is two parts, first it is an annuity (FVA) for 15 years, but then after you stop contributing to it, it will still compound interest (FV) until the end. 

4.     How much did your BEST FRIEND accumulate in their retirement account with interest?

Answer 1

Dear Minah, 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