## Answers

**4-11]**

future value = present value * (1 + rate of return)number of years

If you invest $130,000 at age 30

future value = present value * (1 + rate of return)number of years

future value = $130,000 * (1 + 8.5%)35

future value = $2,259,353.51

If you invest $130,000 at age 40

future value = present value * (1 + rate of return)number of years

future value = $130,000 * (1 + 8.5%)25

future value = $999,279.11

The difference is so large due to the effect of compounding. If you invest at age 30, the investment is compounded for a longer period. Thus, the value of the investment at retirement is much larger.

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