Chapter 4.C, Problem 69E

Get Started Early! Mitch and Bill are both age 75. When Mitch was 25 years old, he began depositing $1000 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 he continued to earn interest for the next 40 years. Bill didn’t start investing until he was 45 years old, but for the next 30 years he made annual deposits of $1000. Assume that both accounts earned an average annual return of 5% (compounded once a year).
a. How much money does Mitch have in his account at age 75?
b. How much money does Bill have in his account at age 75?
c. Compare the amounts of money that Mitch and Bill deposit into their accounts.
d. Write a paragraph summarizing your conclusions about this parable.