(Future value) Selma and Patty Bouvier are twins, and both work at the Springfie
ID: 1174543 • Letter: #
Question
(Future value) Selma and Patty Bouvier are twins, and both work at the Springfield DMV. They decide to save for retirement, which is 40 years away. They'll both receive an annual return of 8 percent on their investment over the next 40 years. Selma invests $3,000 per year at the end of each year only for the first 10 years of the 40-year period for a total of $30,000 saved. Patty doesn't start saving for 10 years and then saves $3,000 per year at the end of each year for the remaining 30 years-for a total of $90,000 saved. How much will each of them have when they retire? a. Selma invests $3,000 per year at the end of each year only for the first 10 years of the 40-year period. How much will Selma have 10 years from now? $(Round to the nearest cent.) b. How much will Selma have when she retires 40 years from now? S(Round to the nearest cent.) c. Patty doesn't start saving for 10 years and then saves $3,000 per year at the end of each year for the remaining 30 years. How much will Patty have when she retires 40 years from now? (Round to the nearest cent.)Explanation / Answer
a.
Selma will have 10 years from now = $43,459.69
Using financial calculator BA II Plus - Input details:
#
I/Y = Rate / Frequency of compounding =
8.000000
PMT = Payment or Coupon or Regular payments / Frequency =
-$3,000.00
N = Total number of periods = Number of years x frequency =
10
PV = Present Value =
$0.00
CPT > FV = Future Value = FV 10 years from now =
$43,459.69
b.
Selma will have 40 years from now = $437,319.92
Using financial calculator BA II Plus - Input details:
#
I/Y = Rate / Frequency of compounding =
8.000000
PMT = Payment or Coupon or Regular payments / Frequency =
$0.00
N = Total number of periods = Number of years x frequency =
30
PV = Present Value = FV of 10 years from now (refer a.) =
-$43,459.69
CPT > FV = Future Value = 40 years from now =
$437,319.92
c.
Patty will have 40 years from now = $339,849.63
Using financial calculator BA II Plus - Input details:
#
I/Y = Rate / Frequency of compounding =
8.000000
PMT = Payment or Coupon or Regular payments / Frequency =
-$3,000.00
N = Total number of periods = Number of years = 30 years>
30
PV = Present Value =
$0.00
CPT > FV = Future Value =
$339,849.63
Using financial calculator BA II Plus - Input details:
#
I/Y = Rate / Frequency of compounding =
8.000000
PMT = Payment or Coupon or Regular payments / Frequency =
-$3,000.00
N = Total number of periods = Number of years x frequency =
10
PV = Present Value =
$0.00
CPT > FV = Future Value = FV 10 years from now =
$43,459.69
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