Question

Twins graduate from college together and start their careers. Twin 1 invests $2500 at the end of each year for 10 years only (until age 31) in an account that earns 7%, compounded annually. Suppose that twin 2 waits until turning 40 to begin investing. How much must twin 2 put aside at the end of each year for the next 25 years in an account that earns 7% compounded annually in order to have the same amount as twin 1 at the end of these 25 years (when they turn 65)? (Round your answer to the nearest cent.)

Answer 1

For twin 1:

At the end of 10 years, He has an amount in his account,

Where, R=2500$, r=0.07, n=10 years

interest period on $70241 is (65-31=34) years.

Total amount at the age of 65 year is,

Where, P=70241$, n=34years, n=0.07

For twin 2,

Suppose, the amount that twin 2 has to put aside at the end of each year for next 25 year is P.

At the end of 25 year both the twin have same amount.