Question 1102238: Twins graduate from college together and start their careers. Twin 1 invests $2500 at the end of each year for 10 years only (until age 31) in an account that earns 6%, compounded annually. Suppose that twin 2 waits until turning 40 to begin investing. How much must twin 2 put aside at the end of each year for the next 25 years in an account that earns 6% compounded annually in order to have the same amount as twin 1 at the end of these 25 years (when they turn 65)? (Round your answer to the nearest cent.)
I have attempted the solution as follows, but it is wrong. Can you please tell me where my work is off?
Twin I
First 10 years (Age 20-30)
PV = 0
Int = 6%
Pmt = $2,500
Solve for FV = $32,951.99
Last 35 years (Age 31-65)
PV = $32,951,99
Pmt = $0
Int = 6%
Solve for FV = $253,271.86
Twin II
PV = $0
Int = 6%
FV = $253,271,86
N= 25 years (age 41-65)
Solve for Pmt = $4,616.31
The $4,616.31 answer is incorrect. My only thought is that I should be starting Twin I at 21 years of age, which would drop the second part of that Twin I answer N value from 35 years (65 yrs - 30 yrs) to 34 years (65 yrs - 31 yrs). I think that would drop the FV for twin I to $239,935.71, and the Pmt for Twin II to 4,355.01. Is that the error here?
Any assistance is appreciated.
Answer by greenestamps(13200)   (Show Source):
You can put this solution on YOUR website!
I get all the same numbers as you, within a few cents.
Do you know if the answer you got by changing from 35 years to 34 years is the right answer? That's the answer I get.
I think the 34 is the right number to use, because each of them is making the contributions at the end of each year. If the first twin started investing at age 21 and made contributions for 10 years, then he is 31 when he stops making contributions; it is then 34 more years to when he is 65.
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