If you deposited the following amount per month (letters in your last name X $80

Question

If you deposited the following amount per month (letters in your last name X $80) from your paycheck from the time you graduate from school until you retire (at age 75) and your employer contributed an extra 6%, how much wealth would you have accumulated? (Be sure to include your age when you graduate). The annual interest rate you will earn should be = letters in your first name X 1.10%. B. Based on your final answers to A above, what would your retirement income be once you retired if you a. earned 5.5% and only lived off the earnings (did not draw down the principle-every month you took out the interest and left the initial amount to earn the same amount of interest-think simple interest) b. earned 5.5% and created an annuity to last until you were 90 years old (this means that by age 90 your balance should be equal to zero).

Explanation / Answer

a) it is nothing but the simple interest calculation because the amount of interest is not reinvested and taken out therefore considering at the age of 16 and till 75 therefore the employer contribution will be 84.8 therefore total 164.8 every month therefore the retirement income would be same principal amount of 164.8 every month therefore 1 year = 1977.6 and no of years = (75-16) = 59 therefore the amount would be = 1977.6*59 = 116678.4

b) If investing the interest amount again then we need to find out the future value factor upto 90-16 years for 5.5% multiplied by 164.8 therefore the value = 164.8*937.51 = 154501

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