Question

Two friends, Alysha and Jennifer, are planning for their retirement. Both are 20 years old and plan on retiring in 40 years with $1,000,000 each. Jennifer plans on making annual deposits beginning in one year (total of 40 deposits) while Alysha plans on waiting and then depositing twice as much as Jennifer deposits.

If both can earn 4.4 percent per year, how long can Alysha wait before she has to start making her deposits? (Round answer to 2 decimal places, e.g. 125. Do not round your intermediate calculations.)

Alysha can wait for ____ years

Answer 1

First, let's find the annual payments made by Jennifer

FV = 1,000,000

n = 40

r = 4.4%

Alysha deposits 9,569.7253329524 * 2 = $19,139.4506659048 every year

Now, let's find the number of deposits Alysha has to make with

PMT = 19,139.4506659048

I/Y = 4.4

FV = 1,000,000

PV = 0

CPT N

N = 27.71965281

Number of years Alysha can wait = 40 - N

Number of years Alysha can wait = 40 - 27.71965281

Number of years Alysha can wait = 12.28034719

Alysha can wait for 12.28 years