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Please help! I need an answer asap :/ and I am completely stuck on what to do

Please help! I need an answer asap :/ and I am completely stuck on what to do-example-1
User Celin
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1 Answer

1 vote

Answer:

  • Julio: $207,859.80
  • Max: $166,930.25

Explanation:

The formulas you need are those for an ordinary annuity and for future value.

Ordinary annuity

A = P((1+r)^t -1)/r . . . . . where r is the annual rate, t is the number of years, and P is the annual payment into the account

Future value

FV = P(1+r)^t . . . . variables defined as above, except P is the principal invested at the beginning of the interval

__

Julio's account

For the period Julio is making payments into the account, the account grows to the value given by the annuity formula:

A = 1500(1.061^15 -1)/0.061 ≈ 35,181.06

Then the future value of that account after 30 more years is ...

FV = $35,181.06(1.061^30) = $207,859.80 . . . at age 65

__

Max's account

The value of Max's annuity is ...

A = $3000(1.061^25 -1)/0.061 = $166,930.25 . . . at age 65

User Archiman
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