6. Twins Barbara and Mary are both age 27. Beginning at age 27, Barbara invests $2,000 per year for 10 years and then never sets aside another penny. Mary waits 10 years and then invests $2,000 per year for the next 30 years. Assuming they both earn 7%, how much will each twin have at age 67? What is the difference between how much each will have, and how do you explain the difference?

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Marilyn

2 April, 12:42

6. Twins Barbara and Mary are both age 27. Beginning at age 27, Barbara invests $2,000 per year for 10 years and then never sets aside another penny. Mary waits 10 years and then invests $2,000 per year for the next 30 years. Assuming they both earn 7%, how much will each twin have at age 67? What is the difference between how much each will have, and how do you explain the difference?

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Azul Cohen · Answer 1

Barbara will have $210,349

Mary will have $188,922

Explanation:

Total time of investment is 40 years = age 67 - age 27

After 10 years, Barbara will have $27,633 (this figure used "FV" calculation in excel = FV (7%,10,2000)

Then Barbara put all $27,633 in next 30 years then she will have $210,349 = 27,633 x (1+7%) ^30

Mary didn't now invest in first 10 years, but then invests $2,000 per year for the next 30 years, so she will have $188,922 = FV (7%,30,2000)