PFIN Fall 2018 Hughes MWF 9am ibrahim abdullah 9/24/18 8:20 AM uiz: Chapter 19 Q
ID: 2808268 • Letter: P
Question
PFIN Fall 2018 Hughes MWF 9am ibrahim abdullah 9/24/18 8:20 AM uiz: Chapter 19 Quiz me Remaining: 01:39 22 Submit Qu his Question: 1 pt 8 of 13 (7 complete) This Quiz: 13 pts possit Retirement Planning and Age. Why is it important to begin retirement planning while you are young? It is important to begin retirement planning while you are young because: (Select the best answer below.) O A. the power of inflation allows you to accumulate far larger sums of money if you begin while you are y r larger sums of money if you begin while you are young. Postponing saving and investing for retirement for just a few years signifcantly decreases the size of the contributions needed to accumulate the same amount that you can amass with smaller contributions over longer time periods of the contributions needed to accumulate the same amount that the contributions needed the contributions needed to accumulate the same amount that you can amass with larger contributions over longer time periods ue of money allows you to accumulate far smaller sums of money if you begin while you are young. Postponing saving and investing for retirement for just a few years significantly increases the size you can amass with larger contributions over shorter time periods ue of money allows you to accumulate far larger sums of money if you begin while you are young. Postponing saving and investing for retirement for just a few years significantly increases the size of to accumulate the same amount that you can amass with smaller contributions over longer time periods he time value of money allows you to accumulate far larger sums of money if you begin while you are young. Postponing saving and investing for retirement for just a few years significantly decreases the size of Click to select your answer 9/24/2018 FB F9 10 F11 F12 PrtSc F3 F4 F6Explanation / Answer
Ans C) The power of time value of money allowys you to accumulate for large sum of money if you begin when you are young. Postponing saving and investing for retirement for just few years significantly increase size of contribution needed to accumulate same amount that ypu can amass with smaller contribution over long period of time
For eg lets say we need 100$ after 5 years. Assuming interest rate to be 10% amount required every year to reach 100$ if we start today is
FV(annuity) = A[(1+r)^n-1/r]
100 = A[(1.1)^5-1/0.1]
100=A[1.61051-1/0.1]
100 =A (6.1051)
A =16.38$
Means we have to put 16.38$ every year for 5 year
Now assume we start our savings after 3 years , the we will need
FV(annuity) = A[(1+r)^2-1/r]
100 = A[(1.1)^2-1/0.1]
100=A[1.21-1/0.1]
100 =A (2.1)
A =47.62$
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.