a) You want to deposit $500 per month into the account for 36 months. Suppose the interest rate is equal to prime interest rate.
i) How much do you have (total) in account after 36 months?
ii) How much of that total is interest?
b) Two people, Ella and Jane, make decision to start saving for retirement. Ella makes decision to invest $4000 the year into the annuity at the age of 25. At the age of 35 she stops making investments and just leaves money there. Jane on other hand, makes decision to begin investing $4000 a year at the age of 40 and invests that money for every year thereafter. Suppose both retire at 70, and that interest rate both get on their investments is 10% (compounded annually) who has most money in the account at age 70?
b) At the age of 30 you make decision to begin saving money. At first you can only afford to deposit $200 per month. Though, at the age of 38 you are able to deposit $300 per month. Then at age of 45 you raise the monthly deposit again to $500 per month. At last at the age of 50 you get promoted to president of company and are able to deposit $2000 per month into account. Suppose the account is earning (prime interest rate + 4%) in interest, compounded monthly, how much have in the account at the age of 70? Treat every time that you change deposit amount as the seperate annuity, and calculate future value (FV) on every annuity seperately. Suppose that each annuity earns compound interest during time it is not receiving deposits.