Melvin begins his retirement fund at age 30,depositing $1,000 per month until age 50.Cindy begins her retirement fund at age 20,depositing the same $1,000 per month amount until age 50.Both Melvin and Cindy earn 5% annual interest on their funds,and there are no tax considerations in this problem.Based on the provided information:

Question

Quizplus · Accepted Answer

Using the formula for the future value of an annuity:

FV = P * (((1 + r)^n - 1) / r)

where FV is the future value, P is the monthly payment, r is the monthly interest rate, and n is the number of months, we can calculate how much Melvin and Cindy will have at age 50:

For Melvin:
P = $1,000
r = 0.05/12
n = 240 (20 years x 12 months)
FV = $351,062.10

For Cindy:
P = $1,000
r = 0.05/12
n = 360 (30 years x 12 months)
FV = $675,684.18

So Cindy will have more than 50% more than Melvin at age 50.

Melvin Begins His Retirement Fund at Age 30,depositing $1,000 Per