Question #85683

At age 21 Julio begins saving $1 comma 200 each year until age 35 (15 payments) in an ordinary annuity paying 7.3% annual interest compounded yearly and then leaves his money in the account until age 65 (30 years). His friend Max begins at age 41 saving $2 comma 400 per year in the same type of account until age 65 (25 payments). How much does each have in his account at age 65?

Expert's answer

For Julio the future amount is:

1) FV(15) = 1,200*((1.073^15 - 1)/0.073) = $30,860.89,

2) FV(30) = 30,860.89*1.073^30 = $255,505.41

For Max the future amount is:

FV(30) = 2,400*((1.073^25 - 1)/0.073) = $158,496.63.

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