Your friend is 40 years and wishes to retire at 65. She wants to pick your finance brains. She wants to know which of the following options will allow her to have more money when she retires. Option 1 is to invest $10,000 per year for thirteen years, and then leave it untouched for 12 years until she retires. Option 2 is to deposit $6,000 at the end of each year into an investment for 25 years until she retires. Both accounts earn 7.5% per year. Please calculate the retirement money saved in each option. Show all your calculations. State which option is better and by how much.
Your friend is 40 years and wishes to retire at 65. She wants to pick your finance brains. She wants to know which of the following options will allow her to have more money when she retires. Option 1 is to invest $10,000 per year for thirteen years, and then leave it untouched for 12 years until she retires. Option 2 is to deposit $6,000 at the end of each year into an investment for 25 years until she retires. Both accounts earn 7.5% per year. Please calculate the retirement money saved in each option. Show all your calculations. State which option is better and by how much.
Chapter5: The Time Value Of Money
Section: Chapter Questions
Problem 22P
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Your friend is 40 years and wishes to retire at 65. She wants to pick your finance brains. She wants to know which of the following options will allow her to have more money when she retires. Option 1 is to invest $10,000 per year for thirteen years, and then leave it untouched for 12 years until she retires. Option 2 is to deposit $6,000 at the end of each year into an investment for 25 years until she retires. Both accounts earn 7.5% per year. Please calculate the retirement money saved in each option. Show all your calculations. State which option is better and by how much.
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