Question

Mary turned 20 today.  She has decided to begin an annuity account to prepare for her future.  She can afford to put $50/month in the investment.  The account returns 7% annual interest.  She hopes she will be able to keep the account until she retires at 65.  If she retires on her birthday, how much money will she have from the annuity for her retirement?

Ashley, Mary’s twin sister, thinks she is nuts.  She has 45 years to worry about that.  Then, when Ashley turned 45, she realized that her pension was not going to be enough to retire on when she is 65 and that she would have to work 10 years longer to build a pension big enough for retirement.  She decides to invest her money in the same annuity that her sister has at the same interest rate.  How much money will she have to invest each month to have the same amount of value as Mary when they both turn 65?

How much money did each sister invest in all?

Answer 1

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