At age 25, James, thinking ahead, deposits $2500 into a retirement account with an average annual interest rate of 11%.
A) Find Jeames' age when his investment is wirth ten times its original value.
b) If James had funded this account at age 18, how much money would give same result as depositing $2500 at age 25? Round to nearest dollar.
c) Suppose the $2500 he deposited when he was 25 grew to $25,000 when he was 40. whatcwas average annual return on his investment? Round answer to nearest tenth of a percent.
Please show all work! Thank you.
Your question was answered here:
http://web2.0calc.com/questions/at-age-25-james-rhinkin-ahead-deposits-2500-into-a-retirement-account-with-an-average-annual-interest-rate-of-11
b) If James had funded this account at age 18, how much money would give same result as depositing $2500 at age 25? Round to nearest dollar.
James deposited 2,500 at the age of 25. Right?. How much would that money be worth at 18, or 7 years earlier? So, you find its Present Value at 18 using this formula:
PV=FV[1 + R]^-N, Where R=Interest rate per period, N=number of periods, PV=Present value, FV=Future value.
PV=2,500 [1 + .11]^ -7
PV=2,500 [1.11]^-7
PV=2,500 x 0.48165841
PV=1,204.15.Which is what we found yesterday. Right?.
Now, if you try using this as PV and 25,000 as FV and solve for n @ 11%, you should get n=29.06 years, which would make James: 18 + 29 =47 years old.
