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Use a 2. (Future value of an annuity) You are tying to plan for retirement in 10

ID: 2820521 • Letter: U

Question

Use a 2. (Future value of an annuity) You are tying to plan for retirement in 10 years and currently you have $150,000 in a savings account and $250,000 in stocks. In addition, you plan to deposit $8,000 per year into your savings account at the end of each of the next 10 years Assuming yur savings account returns 8 percent compounded annually, but credited every quarter to your account, and your investment in stocks will retun 12 percent compounded annually, how much will you have at the end of 10 years? Use a spreadsheet to show how the money is

Explanation / Answer

SAVINGS ACCOUNT Opening balance Interest due Interest credited Investment Closing balance Year0 $ 150,000.00 Q1 $    3,000.00 Q2 $    3,000.00 Q3 $    3,000.00 Year1 Q4 $    3,000.00 $    12,000.00 $      8,000.00 $ 170,000.00 $ 170,000.00 Q1 $    3,400.00 Q2 $    3,400.00 Q3 $    3,400.00 Year2 Q4 $    3,400.00 $    13,600.00 $      8,000.00 $ 191,600.00 $ 191,600.00 Q1 $    3,832.00 Q2 $    3,832.00 Q3 $    3,832.00 Year3 Q4 $    3,832.00 $    15,328.00 $      8,000.00 $ 214,928.00 $ 214,928.00 Q1 $    4,298.56 Q2 $    4,298.56 Q3 $    4,298.56 Year4 Q4 $    4,298.56 $    17,194.24 $      8,000.00 $ 240,122.24 $ 240,122.24 Q1 $    4,802.44 Q2 $    4,802.44 Q3 $    4,802.44 Year5 Q4 $    4,802.44 $    19,209.78 $      8,000.00 $ 267,332.02 $ 267,332.02 Q1 $    5,346.64 Q2 $    5,346.64 Q3 $    5,346.64 Year6 Q4 $    5,346.64 $    21,386.56 $      8,000.00 $ 296,718.58 $ 296,718.58 Q1 $    5,934.37 Q2 $    5,934.37 Q3 $    5,934.37 Year7 Q4 $    5,934.37 $    23,737.49 $      8,000.00 $ 328,456.07 $ 328,456.07 Q1 $    6,569.12 Q2 $    6,569.12 Q3 $    6,569.12 Year8 Q4 $    6,569.12 $    26,276.49 $      8,000.00 $ 362,732.55 INVESTMENT IN STOCK Opening balance Interest Closing balance Year1 $ 250,000.00 $ 30,000.00 $ 280,000.00 Year2 $ 280,000.00 $ 33,600.00 $ 313,600.00 Year3 $ 313,600.00 $ 37,632.00 $ 351,232.00 Year4 $ 351,232.00 $ 42,147.84 $ 393,379.84 Year5 $ 393,379.84 $ 47,205.58 $ 440,585.42 Year6 $ 440,585.42 $ 52,870.25 $ 493,455.67 Year7 $ 493,455.67 $ 59,214.68 $ 552,670.35 Year8 $ 552,670.35 $ 66,320.44 $ 618,990.79

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