Question

# Your parents urged you to begin a habit of saving money early in your life. He...

Your parents urged you to begin a habit of saving money early in your life. He suggested that you put \$10 a day into an envelope. If you follow his advice, at the end of the year you will have \$3650 ( 365 x\$10). Your parents further suggested that you take that money at the end of the year and invest it in an online brokerage mutual fund account that has an annual expected return of 8%.

You are 25 years old. If you start following your parents' advice today and continue saving in this way the rest of your life. How much do you expect to have in the brokerage account when you are 65 years old?

Amouunt in brokerage account at the age of 65 \$ 945,556.29

Working:

 Future Value of Annual deposit = Annual deposit x Future Value of ordinary annuity of \$ 1 = \$       3,650.00 x 259.057 = \$ 9,45,556.29 Future Value of ordinary deposit of \$ 1 = (((1+i)^n)-1)/i Where, = (((1+0.08)^40)-1)/0.08 i 8% = 259.057 n 40