Question

1. You are trying to decide between investing $3,000 or $4,000 at the beginning of each year for the next 20 years into a retirement account yielding 11%. After 20 years, how much extra money would you have in your account if you invested $4,000 annually versus $3,000 annually?--------------------------------------------------------------------------------------------------
2. If 4 years of college tuition cost $15,000 in 2015 what did a college education cost in 1990 if tuition increased at 7% per year between 1990 and 2015? -------------------------------------------------------------------------------------------------------------
3. If you invest $1,500 at the beginning of each year into an account which averages a return of 12%, approximately how long will it take to accumulate $50,000 in the account?

Answer 1

You are trying to decide between investing $3,000 or $4,000 at the beginning of each year for the next 20 years into a retirement account yielding 11%. After 20 years, how much extra money would you have in your account if you invested $4,000 annually versus $3,000 annually?

Future value of an annuity immediate:

PMT = 3,000

If PMT = 4,000

Extra money = 285,060.574729855 - 213,795.431047391

Extra money = $71,265.143682464

If 4 years of college tuition cost $15,000 in 2015 what did a college education cost in 1990 if tuition increased at 7% per year between 1990 and 2015?

n = 2015 - 1990 = 25

PV = FV/(1 + r)^n

PV = 15,000/(1 + 0.07)^25

PV = $2,763.7376628336

The tuition fee cost $2,763.7376628336 in 1990

If you invest $1,500 at the beginning of each year into an account which averages a return of 12%, approximately how long will it take to accumulate $50,000 in the account?

Set the calculator to BGN mode

PMT = -1,500

FV = 50,000

PV = 0

I/Y = 12

CPT N

N = 13.41077724

Approximately it would take 13 years