How much money can you accumulate if you skip the Starbucks and save $4.25 (the

Question

How much money can you accumulate if you skip the Starbucks and save $4.25 (the price of a non-fat, soy-free grandé cafe mocha) every day of the working week and invest the money. Assume that you work on average 22 days per month and you make a monthly deposit of your savings from going Starbucks-free. Further assume that you can avoid the caffeine for the next 35 years that you are working. How much can you accumulate by saving the same amount each month if your investments have a rate of return of 7.5% per year?

Explanation / Answer

Solution.

Per day saving = $4.25

TIME = 35 Year X 12 month x 22 days = 9,240 day's.

Rate of interest = 7.5% per day.

Annual rate of interest = 7.23%

Value of saving = $93.50 x ( 1.075 ^30 ) 8.75 = $818.12 .

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