Answered: Suppose you start saving for retirement…

Advanced Engineering Mathematics

10th Edition

ISBN:9780470458365

Author:Erwin Kreyszig

Publisher:Erwin Kreyszig

Chapter2: Second-order Linear Odes

Section: Chapter Questions

Problem 1RQ

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Related questions

Question

Suppose you start saving for retirement when you are 35years old. You invest $5,000the first year and increase this amount by 2%each year to match inflation. How much money will you have saved after 20years if the interest rate earned on the retirement account is 7% per year?

a) you will have saved $ ( Round to nearest dollar)

b) on the other hand you will have saved $ if the rate of increase of the investment drop was 7% instead of the original 2%

Expert Solution

Step 1: Description of given data:

Given data:

$A equals $ space 5000$

$g equals 2 space percent sign$

$r equals 7 space percent sign$

$n equals space 20 space y e a r$

Formula used:

$F V equals A open square brackets fraction numerator left parenthesis 1 plus r right parenthesis to the power of n minus left parenthesis 1 plus g right parenthesis to the power of n over denominator r minus g end fraction close square brackets$