Question

1) The Entrepreneurial class of the spring 2020 semester graduates from Slippery Rock University. As a result of hard lessons resulting from the economic downturn and the Covid-19 lockdown, at the age of 25 they start a retirement account. Each student places $5,000 in a 401k at the beginning of year one, $8,000 at the beginning of year two, $11,000 at the beginning of year three, $14,000 at the beginning of year four, and then $15,000 per year until they retire at the age of 60. If money earns 8 percent per year, how much will each student have in their retirement account at age 60?

Set up a table with proper labels for each column to show your answer. Age, Amount, FVF, & FV. Please show work.

Answer 1

Amounts in $

Age	Year	Amount (A)	Rate of return	FVF (B)	FV (A)*(B)
25	1	5000	8%	0.9259	4630
26	2	8000	8%	0.9070	7256
27	3	11000	8%	0.7938	8732
28	4	14000	8%	0.7350	10290
29-60	5-60	15000	8%	9.064	135966
Total					166874

Calculation of FVF

Year -1 = 1/(1+0.08)^1 =0.9259

Year -2 = 1/(1+0.08)^2 =0.9070

Year -3 = 1/(1+0.08)^3 =0.7938

Year -4 = 1/(1+0.08)^4 =0.7350

Year -5 to 60 = 1/(1+0.08)^60 - ( (1/(1+0.08)^1)+(1/(1+0.08)^2)+(1/(1+0.08)^3)+(1/(1+0.08)^4)) = 9.064

in simple language we can say for year 5 to 60 we can calculate FVF by calculating FVF for 60 years then deduct for 1 to years FVF)