Quandaries and Queries
  

 

Level of question - secondary
 
Question:
A human resources department wants a report that shows its employees the benefits of saving for retirement. Produce a report that shows 12 predicted retirement account values for each employee - the values if the employee saves 5, 10, or 15% of his or her annual salary for 10, 20, 30, or 40 years. Assume that savings grow at a rate of 8% per year. Not really interested in answers, just the equations to solve the problems.
 
Thanks,
Nick
 

 

Hi Nick,

I would prepare the report for some salary in the appropriate range, say $50,000, and generate a table with 3 rows (5, 10 and 15%) and 4 (10, 20, 30 and 40 years) columns.

In the first row and first column (5% for 10 years) put the amount of savings generated including the 8% interest. 5% of $50,000 is $250 so this person invests $250 each year for 10 years at 8% per year. Thus the return for this person is the sum of 10 quantities

  1. $250 invested for 10 years at 8% per year
  2. $250 invested for 9 years at 8% per year
  3. $250 invested for 8 years at 8% per year
  4. .
  5. .

Compute the 10 quantities, add them and record the result in the table.

Do this for each of the 12 positions in the table.

Penny

 
 

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