Compound interest is a very powerful way to save for your retirement. Saving a l

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Compound interest is a very powerful way to save for your retirement. Saving a little and giving it time to grow is often more effective than saving a lot over a short period of time. To illustrate this, suppose your goal is to save $1 million by the age of 68, What amount of money will be saved by socking away $2,803 per year starting at age 24 with an 8% annual interest rate. Will you achieve your goal using the long-term savings plan? What amount of money will be saved by socking away $16,423 per year starting at age 45 at the same interest rate? Will you achieve your goal using the short-term savings plan? Click the icon to view the interest and annuity table for discrete compounding when i-8% per year The future equivalent of the long-term savings plan i $ (Round 10.3711 10.5288 10.6748 10.8100 10.9352 11.0511 5.8715 0.0164 0.0150 0.0137 0.0125 0.0114 0.0105 0.0096 0.0088 0.0081 0.0075 0.0069 0.0063 0.0058 0.0053 0.0049 0.0045 0.0964 0.0950 0.0937 0.0925 0.0914 0.0905 0.0896 0.0888 0.0881 0.0875 0.0869 0.0863 0.0858 0.0853 0.0849 0.0845 0.0842 0.0839 0.0836 0.0833 0.0830 0.0828 0.0826 23 0.1703 0.1577 60.8933 66.7648 73.1059 79.9544 87.3508 95.3388 103.9659 113.2832 11.2578 123.3459 134.2135 145.9506 11.5139 158.6267 172.3168 11.6546 187.1021 203.0703 220.3159 238.9412 259.0565 11.9246 280.78 304.2435 329.5830 12.0 356.9496 12.0771 386.5056 12.1084 6.8485 7.3964 7.9881 26 0.1352 0.1252 0.1073 0.0994 0.0920 0.0852 0.0789 0.0730 0.0676 0.0626 0.0580 0.0537 0.0497 0.0460 0.0426 0.0395 0.0365 0.0338 0.0313 29 10.8677 11.7371 12.6760 13.6901 14.7853 15.9682 17.2456 18.6253 1153 11.3498 32 34 36 38 40 11.5869 11.7172 11.7752 11.8289 11.8786 23.4625 25.3395 27.3666 29.5560 31.9204 0.0039 0.0036 0.0033 0.0030 0.0028 0.0026 10 11.9672 12.0067 Enter your answer in the answer box and then click Check Ans 43 remaining

Explanation / Answer

1) When the aim is to solve $1 million in (68 - 24) = 44 years at a rate of $2803 with an interest rate of 8%, the accumulated future value is
FV = 2803(F/A, 8%, 44) = 2803*356.94965 = 1,000,530 (Long term)

2) When the aim is to solve $1 million in (68 - 45) = 23 years at a rate of $16423 with an interest rate of 8%, the accumulated future value is
FV = 16423(F/A, 8%, 23) = 16423*60.89930 = 1,000,149 (Short term)

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