Question

5.) Adam and Ashley both graduate from Dalton State and begin working as financial analysts. They will both work for exactly 40 years and then retire. Both plan to save for retirement, however each goes about it differently. Ashley begins saving $6,000 per year for ten years, beginning at the end of her first year on the job. Adam wants to travel and buy nice furniture for his house and allows those ten years to pass before he begins saving for retirement (note: he begins saving at the end of the 11^th year). He saves $6,000 per year (for 30 years) until he retires. If they both get a 11.00% interest rate, how much more will Ashley have at retirement compared to Adam? DO NOT USE DOLLAR SIGNS OR COMMAS IN YOUR ANSWER. ROUND ANSWER TO THE NEAREST DOLLAR

Answer 1

Amount saved by Ashley = 2296831 and amount saved by Adam = 1194125

Explanation: We will compute the future value of each saving at the end of the 40th year. Calculations are shown below:

Computation for Ashley:

Year	Amount saved per year	1+r	FVIF (for 40th year)	FV = amount*FVIF
1	6,000	1.11	58.5593	351,356.04
2	6,000		52.7562	316,536.97
3	6,000		47.5281	285,168.44
4	6,000		42.8181	256,908.51
5	6,000		38.5749	231,449.11
6	6,000		34.7521	208,512.71
7	6,000		31.3082	187,849.29
8	6,000		28.2056	169,233.59
9	6,000		25.4104	152,462.70
10	6,000		22.8923	137,353.78
			Total	2,296,831

Computation for Adam:

Year	Amount saved per year	1+r	FVIF (for 40th year)	FV = amount*FVIF
11	6,000	1.11	20.6237	123,742.14
12	6,000		18.5799	111,479.41
13	6,000		16.7386	100,431.90
14	6,000		15.0799	90,479.19
15	6,000		13.5855	81,512.78
16	6,000		12.2392	73,434.94
17	6,000		11.0263	66,157.60
18	6,000		9.9336	59,601.44
19	6,000		8.9492	53,694.99
20	6,000		8.0623	48,373.87
21	6,000		7.2633	43,580.06
22	6,000		6.5436	39,261.32
23	6,000		5.8951	35,370.56
24	6,000		5.3109	31,865.37
25	6,000		4.7846	28,707.54
26	6,000		4.3104	25,862.65
27	6,000		3.8833	23,299.68
28	6,000		3.4985	20,990.70
29	6,000		3.1518	18,910.54
30	6,000		2.8394	17,036.53
31	6,000		2.5580	15,348.22
32	6,000		2.3045	13,827.23
33	6,000		2.0762	12,456.96
34	6,000		1.8704	11,222.49
35	6,000		1.6851	10,110.35
36	6,000		1.5181	9,108.42
37	6,000		1.3676	8,205.79
38	6,000		1.2321	7,392.60
39	6,000		1.1100	6,660.00
40	6,000		1.0000	6,000.00
			Total	1,194,125