Question

Future Value At age 20 you invest $1,000 that earns 7 percent each year. At age 30 you invest $1,000 that earns 10 percent per year. In which case would you have more money at age 60?

Answer 1

Answer:

In the case of age 30, there will be more money at the age of 60

Explanation:

When person start investing at the age of 20 then total year till 60 years age is  = 40 years.

Interest rate (r ) = 7 percent or 0.07.

Investment amount (Present value) = $1000

Now the total amount at the age of 60 years is calculated below.

$Total \ amount = Present \ value (1 + r)^{n} \\= 1000 ( 1 + 0.07 ) ^{40}\\= 14974.4578 \ dollars$

Now calculate the total amount at the age of 60 years when he invest at the age of 30 and earns interest rate 10 percent. Now the number of years is 30.

$Total \ amount = Present \ value (1 + r)^{n} \\= 1000 ( 1 + 0.1 ) ^{30}\\= 17449.4023 \ dollars$