Question

Assume you can earn 9 % per year on your investments. a. If you invest $ 100 comma 000 for retirement at age​ 30, how much will you have 35 years later for​ retirement? b. If you wait until age 40 to invest the $ 100 comma 000​, how much will you have 25 years later for​ retirement? c. Why is the difference so​ large?

Answer 1

Answer:

(a) future value = $2041396.79

(b) future value = $862308.06

(c) financially suggest to invest early so that here amount  fetch maximum returns

Explanation:

given data

rate = 9%

solution

when we invest = $100,000

time t = 35 year

so we get here future value FV

FV = Present value × $(1+r)^{t}$  ...................1

FV = $100,000 × $(1+0.09)^{35}$  

FV = $2041396.79

and

when time will be 25 year

future value will be

FV =  Present value × $(1+r)^{t}$ .................2

Fv = $100,000 × $(1+0.09)^{25}$

FV = $862308.06

and

we can see difference is large because of the compounding effect

so  the financially suggest to invest early so that here amount  fetch maximum returns