Scenario #2: Pamela Pamela is also a saver. She sets aside $100 per month during her 40 year career. She invests in the US stock market

through an index fund that averages a 7% return over this 40 year period.

5.

What is the total balance in

the account after 40 years?

6. How much of the total did

Pamela contribute herself?

7. How much money did Pamela

make through compounded

returns in this investment

account?

8. Why is Pamela's total balance so much greater than Raul's even though she contributed the same amount as

he did?

5. future balance = monthly contribution x FV annuity factor

in order to determine the FV annuity factor, we must first determine the effective interest rate

1.07 = (1 + r)¹²

¹²√1.07 = ¹²√(1 + r)

1.005654 = 1 + r

r = 0.005654 = 0.5654%

FV annuity factor, 0.5654%, 480 periods = 2,471.42178

future balance = $100 x 2,471.42178 = $247,142.18

6. Pamela contributed 480 x $100 = $48,000

7. Pamela earned $247,142.18 - $48,000 = $199,142.18

8. there is no information about Raul

hi noah!

the first time you break a rule, you get a warning.

if you continue to break rules you get kicked out for a certain amount of time.

so, to answer your question 1.

hope this buddy!

- courtney

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