Question

10. A 20-year-old student wants to save $3 a day for her retirement. Every day she places $3 in a drawer. At the end of each year, she invests the accumulated savings ($1,095) in a brokerage account with an expected annual return of 12%. How much money will she have when she is 65 years old? (We did this part in class)

Answer 1

Answer:

The future value of this students savings will be for 1,487,261.89 dollars

Explanation:

We will calculate the future value of an annuity 1,095 of 45 years at 12% interest rate:

$PTM \times \frac{1-(1+r)^{-time} }{rate} = FV$

PTM 1,095 dollars

time     45 years

rate          12% = 12/100 = 0.12

$1095 \times \frac{(1+0.12)^{45} -1}{0.12} = FV$

FV $1,487,261.89