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Thursday, May 11, 2006 

Scribe

First off I'd like to thank Dom for making me scribe and interrupting my evening by making me do this

Here we go, we had a group question again today, thats all.

Twins Are Not Always Alike

Amber and Angela, twin sisters, make the following investments for retirement. In both cases the financial institution pays 8.25% per annum compounded monthly.
Amber deposits $100 per month from her 20th birthday until her 30th birthday (121 payments).
After her last deposit, she leaves her money with the financial institution until her 50th birthday.
Angela deposits $100 per month from her 30th birthday until her 55th birthday (301 payments). (Remember, the payments are calculated for the end of the month)

(a) Calculate the value of each investment.
(b) What percent of the final value did each sister pay into the investment?

A)
Amber
TVMSOLVER
N = 121
I% = 8.25
PV = 0
Pmt = 100
FV = [Solve] = 18779.52
P/Y = 12
C/Y = 12

Then she lets it sit till shes 55

TVMSOLVER
N = 300
I% = 8.25
PV = 18779.52
Pmt = 0
FV = 146637.48
P/Y = 12
C/Y = 12

So she has $146637.48 when she turns 55 years old

Angela
TVMSOLVER
N = 301
I% = 8.25
PV = 0
Pmt = 100
FV = [Solve] = 99839.84
P/Y = 12
C/Y = 12

Angela has $99839.84 when she turns 55 years old

B)
Amber
(Payments X Number of payments)/Future Value = Percent of Total that was payed
(100 X 121)/146637.48 = 8.25%
Amber pays 8.25% of the final value

Angela
(100 X 301)/99839.84 = 30.15%
Angela payes 30.15% of the final value




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