Question

6. Twins Barbara and Mary are both age 27. Beginning at age 27, Barbara invests $2,000 per year for 10 years and then never sets aside another penny. Mary waits 10 years and then invests $2,000 per year for the next 30 years. Assuming they both earn 7%, how much will each twin have at age 67? What is the difference between how much each will have, and how do you explain the difference?

Answer 1

Answer:

Barbara will have $210,349

Mary will have $188,922

Explanation:

Total time of investment is 40 years = age 67 - age 27

After 10 years, Barbara will have  $27,633 (this figure used "FV" calculation in excel = FV(7%,10,2000)

Then Barbara put all $27,633 in next 30 years then she will have $210,349 = 27,633 x (1+7%)^30

Mary didn't now invest in first 10 years, but then  invests $2,000 per year for the next 30 years, so she will have $188,922 = FV(7%,30,2000)