Mitch and Bill are both age 75. When Mitch was 25 years old, he began depositing $1400 per year into a savings account. He made deposits for the first 10 years, at which point he was forced to stop making deposits. However, he left his money in the account, where it continued to earn interest for the next 40 years. Bill didn't start saving until he was 46 years old, but for the next 29 years he made annual deposits of $1400. Assume that both accounts earned an average annual return of 5% (compounded once a year). Complete parts (a) through (d) below. At age 75, how much money does he have in his acct?
Mitch and Bill are both age 75. When Mitch was 25 years old, he began depositing $1400 per year into a savings account. He made deposits for the first 10 years, at which point he was forced to stop making deposits. However, he left his money in the account, where it continued to earn interest for the next 40 years. Bill didn't start saving until he was 46 years old, but for the next 29 years he made annual deposits of $1400. Assume that both accounts earned an average annual return of 5% (compounded once a year). Complete parts (a) through (d) below. At age 75, how much money does he have in his acct?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Question
Mitch and Bill are both age 75. When Mitch was
25
years old, he began depositing
$1400
per year into a savings account. He made deposits for the first 10 years, at which point he was forced to stop making deposits. However, he left his money in the account, where it continued to earn interest for the next
40
years. Bill didn't start saving until he was
46
years old, but for the next
29
years he made annual deposits of
$1400.
Assume that both accounts earned an average annual return of
5%
(compounded once a year). Complete parts (a) through (d) below.
At age 75, how much money does he have in his acct?
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c. Compare the amounts of money that Mitch and Bill deposit into their accounts.
Mitch deposits
$enter your response here
in his account and Bill deposits
$enter your response here
in his account.Solution
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