Answers
Part 1:
Answer: Option c is correct.
Future Value =$1000000
Payment =$4500
Rate=7.4%
Present value=0
The number of years=40.04792527 or 40 years (Rounded to the nearest whole number)
Part 2:
Answer: Option d is correct.
Future Value =$1000000
Payment=$4500
Rate=10%
Present value=0
The number of years=32.99867528 or 33 years (Rounded to the nearest whole number)
So, George can retire =40-33=7 years sooner.
Part 3:
Answer: Option a is correct.
After 25 yrs:
Kevin will have future value=$301,505.45
George will have future value= $442,561.77
So, George’s will have =$442,561.77-$301,505.45=$141,056.32 more than Kevin.
Part 4:
Answer: Option d is correct.
Future Value= 1000000
Rate=7.4%
Present value =0
Time period = 32.99867528 (Same as George)
So, Kevin has to make annual contribution of $7,751.69
0 R S Solution 2 (Kevin's friend George) Future value $1,000,000 Payment ($4,500) Rate 10% Present value NPER= 32.99867528 Formula used: NPER(T5,14,16,T3,0) 2 Solution 1 (For Kevin) 3 Future value $1,000,000 4 Payment ($4,500) 5 Rate 7.40% 6 Present value 7 NPER= 40.04792527 8 Formula used: NPER(Q5, Q4, Q6,Q3,0) 9 10 Solution 3 (Calculation for Kevin) 11 Present value 0 12 Time period 25 13 Payment ($4,500) 14 Rate 7.40% 15 Future value $301,505.45 16 Formula used: FV(Q14, Q12,013,Q11,0) 17 18 Solution 4: 19 Future value $1,000,000 20 Rate 7.40% 21 Present value 22 Time period 32.99867528 23 Payment= ($7,751.69) 24 Formula used: PMT(Q20,022,021,219,0) Solution 3 (Calculation for George) Present value Time period Payment ($4,500) Rate 10% Future value $442,561.77 Formula used: FV(T14,112,113,T11,0)
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