Answer:
A. The future value of $5,900 invested over 36 years will be $252,626.70
B. The Present Value of $5,900 un-invested until after 10 years, would have depleted the Value to $2,077.89
Then investing this $2,077.89 for the next 26 years will take the Future Value of our investment to $31,334.285
Explanation:
A. Using Future Value computation which states that
FV = Present Value x (1 + interest) ^no of years
Based on Question
FV = $5,900 x (1 + 11%)^36 years
= $252,626.70
B. If the contribution is delayed by 10 years,
The formula remains the same only that the variables would have changed.
n = 26 years
PV = $5,900 discounted with the interest rate as at Year 10.
= 5,900 x (1 + 11%)^-10
= $2,077.889
For not investing the $5,900 now, the value would have depleted to $2,077 by the 10th year
Now let's include this information in the Future Values computation
= $2077.889 x (1 + 11%)^26
= $31,334.285
