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Retirement Investment Advisors, Inc., has just offered you an annual interest rate of 4.9 percent until you retire in 35 years. You believe that interest rates will increase over the next year and you would be offered 5.5 percent per year one year from today. If you plan to deposit $15,500 into the account either this year or next year, how much more will you have when you retire if you wait one year to make your deposit?

Respuesta :

Manetho

Answer:

$13082

Explanation:

Present value = $15,500 in time T= 35 years at rate r= 4.9 %

FV= 15,500 (1.049)^35

= 15,500 (5.33)

= $82,615

Future Value of $15,500 in 34 years at 5.5 percent

= 15,500 (1.055)^34

= 15,500 x 6.174

= $95,697

The amount will be (95,697-82,615)= $13082  higher if you wait for one more year and the interest rate increases.

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