Question

Part 2 question: Who wants to be a millionaire? 2. Sorry, you didn’t win the lottery, but here’s a way you can still be a millionaire! Starting at age 22, every night you take $5 out of your pocket and put it in a manila envelope (title it “Lottery Winnings”). At the end of the year, you place the money from the envelope in a stock fund with an average interest rate of 10%. o How much will you have in the account when you retire at age 65? o What would be different if you started this plan later in your life?

Answer 1

Yearly Deposit into Stock Fund = $5 * 365 days = $1825

Year of Deposit = 65 years - 22 years = 43 Years

Future Value at year 65 = yearly deposit * FVAF(0.10,43)

Future Value at year 65 = $1825 * 592.4007

Future Value at year 65 = $1081131.26

If the Plan started at a later point of time will result in less future value because of time value of money logic"Present money is more valuable than future money".