Question

1. Time Value of Money:

You are saving up for retirement and are able to save $9,000 per year.

a. Suppose you can earn 8.5% on your investment. How much will you have after 30 years?

PV =

FV =

N =

PMT =

I =

b. How much would you have if you work for an additional 5 years?

PV =

FV =

N =

PMT =.

I =

c. How much will you have to save per year to earn same amount in 30 years, instead of 35?

PV =

FV =

N =

PMT =

I=

Answer 1

(a) The formula in excel will look like as per below:

=FV(8.5%,30,-$9000), it means I = 8.5%, PV = 0, PMT = $9000, N = 30.

It will give Future value (FV) = $1117932.53

(b) The formula in excel will look like as per below:

=FV(8.5%,35,-$9000), it means I = 8.5%, PV = 0, PMT = $9000, N = 35.

It will give Future value (FV) = $1734315.08.

(c) The formula in excel will look like as per below:

=PMT(8.5%,30,,-$1734315.08), it means I = 8.5%, PV = 0, FV = $1734315.08, N = 30.

It will give paymets per year (PMT) = $13962.23