Question

An engineer has been making annual deposits of $5,000 for 10 years into a savings account earning 8% interest. He/she decides to take a mid-life mini-retirement, and withdraws $5,000 for the next 5 years from the savings account (end of years 11, 12, 13, 14, and 15). At the end of the 5 year retirement they return to the workforce and deposit $15,000 every year for the next 10 years (end of years 16,17,....25). What is the Value of the savings account at the end of year 25? Enter in your answer rounded to the nearest whole dollar (0 decimal places) (i.e. $500,500.57 enter in as $500,501)

Answer 1

First determine the present value of investment of first 10 years

The investment after first 10 years will be equal to $ 72,432.81.

Now, the investor will be withdrawing $ 5,000 every year for next five years and the invested amount will be growing at the same rate

Amount in the account after 15 years will be $ 77,094.56. this will be in the account for next 10 years and another $ 15,000 per year will be deposited. Thus the future value after 25 years will be

At the end of 25 years a.ount in the account will be equal to $ 447,068.

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