Question

68. 69. Jeremiah has a long-term savings plan. For 10 years, he has been investing $150 a month, earning 4.25% interest compounded monthly. How much more would he have saved if he had chosen to make deposits of $200 a month? When using the financial calculator, be sure to indicate what you have entered for each parameter, to receive full marks. (5 marks) Darren is 30 and is debating whether he should start investing $100 a month now for retirement at 60 or if he should wait until he is more established at 40 and invest $200 a month then. If the investment earns approximately 10% p.a. compounded monthly, what would you recommend for saving the largest amount? Provide supporting evidence for your decision and indicate the values for any parameters used in financial calculator calculations. (7 marks)

please do both questions

Answer 1

QUESTION I Casel Future Value=PMT(1+r/k)"k-1 r/k 10 Total Time Period(n) PMT r k 150 4.25% 12 Compounded monthly Future Value=150(1+.0425/12) (12 X101 - 1 0.0425/12 =150(12.0425/12) 120-1 0.425 (150 X 149.207) 22381.11 Future Value Case II Total Time Period(n) PMT 10 200 4.25% r k 12 Compounded monthly Future Value=200(1+.0425/12) (22 x 10)-1 0.0425/12 =200(12.0425/12) 120-1 x 12 0.425 (200 X 149.207) Future Value 29841.49 Saving by deposit of 200 7460.38 (29841.49-22381.11) QUESTION II Casel Future Value=PMT(1+r/k)"K-1 r/ Total Time Period(n) PMT 30 years (Age is 30 and retires at 60) 100 0.1 12 Compounded monthly r k Future Value=100(1+0.1/12) 30 x 12-1 0.1/12 =100(12.1/12) 360-1 X 12 0.1 (12000 X 18.837) Future Value 226044 at 60th year Case 11 Total Time Period(n) PMT 20 ( start at 40 and retires at 60) 200 0.1 12 Compounded monthly r k Future Value=200(1+0.1/12) (20x121-1 0.1/12 Future Value=200(12.1/12 (2401_1 x 12 0.1 24000 X 6.3280 Future Value 151872 at 60th year Conclusion:Monthly payment of 100 is a better plan as he is getting more on monthly payment of 100