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Ms. Early Saver has decided to invest $1,000 at the end of each year for the next 10 years

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Question;SOLUTION STRATEGYSTEPS:1. Draw a time line2. Identify the values:a. Present valueb. Interim payments (ordinary annuity/annuity due)c. Future valued. Discount rate/Interest rate / Required rate of returne. Period of investment3. Use your financial calculators for computationQUESTION:Ms. Early Saver has decided to invest $1,000 at the end of each year for the next 10 years, and then she will just let the amount compound for 40 additional years. Her brother, Late Saver, has a different investment program: He will invest nothing for the next 10 years, but will invest $1,000 per year (at the end of each year) for the following 40 years. If we assume an 8 percent rate of return, compounded annually, which investment program will be worth more 50 years from now?Calculate the value of the investment if Ms. Early Saver and her brother, Late Saver, make the $1000 investment per year in the beginning of each year.

 

Paper#48631 | Written in 18-Jul-2015

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