A 20-year-old student wants to save $5 a day for her retirement. Every day she p

Question

A 20-year-old student wants to save $5 a day for her retirement. Every day she places $5 in a drawer. At the end of each year, she invests the accumulated savings ($1,825) in a brokerage account with an expected annual return of 8%.

-If she keeps saving in this manner, how much will she have accumulated at age 65?

-If a 40-year-old investor began saving in this manner, how much would he have at age 65?

-How much would the 40-year-old investor have to save each year to accumulate the same amount at 65 as the 20-year-old investor?

Explanation / Answer

Assuming she started saving from 1st day of in age of 21 because she is 20 year old then she will invest first time at end of 21 year age.

No. of year at age 65= 65-21= 44 YEAR

Value of Investment at age 65 = $53939.65

2- If Invest a person of 40 year old age then Investment value= $11572.65

Age Investment Interest Accum. Bal. 21 $1,825.00 $1,825.00 22 $1,825.00 $146.00 $1,971.00 23 $1,825.00 $157.68 $2,128.68 24 $1,825.00 $170.29 $2,298.97 25 $1,825.00 $183.92 $2,482.89 26 $1,825.00 $198.63 $2,681.52 27 $1,825.00 $214.52 $2,896.05 28 $1,825.00 $231.68 $3,127.73 29 $1,825.00 $250.22 $3,377.95 30 $1,825.00 $270.24 $3,648.18 31 $1,825.00 $291.85 $3,940.04 32 $1,825.00 $315.20 $4,255.24 33 $1,825.00 $340.42 $4,595.66 34 $1,825.00 $367.65 $4,963.31 35 $1,825.00 $397.07 $5,360.38 36 $1,825.00 $428.83 $5,789.21 37 $1,825.00 $463.14 $6,252.35 38 $1,825.00 $500.19 $6,752.53 39 $1,825.00 $540.20 $7,292.74 40 $1,825.00 $583.42 $7,876.15 41 $1,825.00 $630.09 $8,506.25 42 $1,825.00 $680.50 $9,186.75 43 $1,825.00 $734.94 $9,921.69 44 $1,825.00 $793.73 $10,715.42 45 $1,825.00 $857.23 $11,572.65 46 $1,825.00 $925.81 $12,498.47 47 $1,825.00 $999.88 $13,498.34 48 $1,825.00 $1,079.87 $14,578.21 49 $1,825.00 $1,166.26 $15,744.47 50 $1,825.00 $1,259.56 $17,004.03 51 $1,825.00 $1,360.32 $18,364.35 52 $1,825.00 $1,469.15 $19,833.50 53 $1,825.00 $1,586.68 $21,420.18 54 $1,825.00 $1,713.61 $23,133.79 55 $1,825.00 $1,850.70 $24,984.49 56 $1,825.00 $1,998.76 $26,983.25 57 $1,825.00 $2,158.66 $29,141.91 58 $1,825.00 $2,331.35 $31,473.27 59 $1,825.00 $2,517.86 $33,991.13 60 $1,825.00 $2,719.29 $36,710.42 61 $1,825.00 $2,936.83 $39,647.25 62 $1,825.00 $3,171.78 $42,819.03 63 $1,825.00 $3,425.52 $46,244.55 64 $1,825.00 $3,699.56 $49,944.12 65 $1,825.00 $3,995.53 $53,939.65

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