SOLUTION: Frank has deposited $1000 at the end of each year into a retirement savings plan for the last 10 years.His deposits earned interest at j=8% for the first 3 years,at j=10.25% for th
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-> SOLUTION: Frank has deposited $1000 at the end of each year into a retirement savings plan for the last 10 years.His deposits earned interest at j=8% for the first 3 years,at j=10.25% for th
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Question 1194021: Frank has deposited $1000 at the end of each year into a retirement savings plan for the last 10 years.His deposits earned interest at j=8% for the first 3 years,at j=10.25% for the next 4 years,and at j=9% for the last 3 years.
a) what is accumulated value of his retirement plan?
b) what is the total interest earned for the 10 years?
c) find an equivalent interest rate (same for 10 years ),which conducts to the same results of a) and b). Answer by Theo(13342) (Show Source):
for the first part, the inputs were:
present value = 0
payment at the end of each year = 1000
number of years = 3
interest rate per year = 8%
output was future value = 3246.4
for the second part, the inputs were:
present value = -3246.4
payment at the end of each year = -1000
number of years = 4
interest rate per year 10.25%
output was future value = 9454.513243
for the third part, the inputs were:
present value = -9454.513243
payment at the end of each year = -1000
number of years = 3
interest rate per year = 9%
output was future value = 15521.96883
the total investment was 1000 * 3 + 1000 * 4 + 1000 * 3 = 10,000
the total interest earned was 15,521.96883 minus 10,000 = 5,521.96883.
for the last part, the inputs were:
present value = 0
payment at the end of each year = -1000
number of years = 10
future value = 15521.96883
output was interest rate = 9.448451033%
here's what it looks like in a year by year display using excel.
