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 $3,501 per year starting at age 23 with a 7% annual interest rate. Will you achieve your goal using the long-term savings plan? What amount of money will be saved by socking away $24,394 per year starting at age 48 at the same interest rate? Will you achieve your goal using the short-term savings plan?

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 $3,501 per year starting at age 23 with a 7% annual interest rate. Will you achieve your goal using the long-term savings plan? What amount of money will be saved by socking away $24,394 per year starting at age 48 at the same interest rate? Will you achieve your goal using the short-term savings plan?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

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 $3,501 per year starting at age 23 with a 7% annual interest rate. Will you achieve your goal using the long-term savings plan? What amount of money
will be saved by socking away $24,394 per year starting at age 48 at the same interest rate? Will you achieve your goal using the short-term savings plan?
E Click the icon to view the interest and annuity table for discrete compounding when i= 7% per year.
The future equivalent of the long-term savings plan is S. (Round to the nearest dollar.)
You
V achieve your goal using the long-term savings plan.
The future equivalent of the short-term savings plan is $. (Round to the nearest dollar.)
You
achieve your goal using the short-term savings plan.

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