You plan to retire in 20 years. Use present value tables to calculate whether it is better for you to save $22,000 a year for the last 10 years before retirement or $16,300 for each of the 20 years. Assume you are able to earn 10 percent interest on your investments. (Future Value of $1, Present Value of $1, Future Value Annuity of $1, Present Value Annuity of $1) (Use appropriate factor (s) from the tables provided and final answer to the nearest whole dollar amount.)

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Yesenia Castillo

6 August, 22:31

You plan to retire in 20 years. Use present value tables to calculate whether it is better for you to save $22,000 a year for the last 10 years before retirement or $16,300 for each of the 20 years. Assume you are able to earn 10 percent interest on your investments. (Future Value of $1, Present Value of $1, Future Value Annuity of $1, Present Value Annuity of $1) (Use appropriate factor (s) from the tables provided and final answer to the nearest whole dollar amount.)

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Carmelo · Answer 1

Decision; Option 2 is better because it would yield more future sum

Explanation:

The approach would be to be to determined the future of the investment for the two options and then go for the higher

Option 1

FV = A * ((1+r) ^n - 1) / r

FV - Future value, r - interest rate, n - number of years, A - annual deposit

FV = 22,000 * ((1.1) ^10 - 1) / 0.1

= $350,623.341

Option 2

FV = 16,300 * (1.1^20 - 0.1) / 0.1

=$933,582.49

Decision; Option 2 is better because it would yield more future sum

(about $582,959.15) more than option 1