RRSP What amount does each have today?

[aisha]

Grant and Kera are both 75 years old. When Kera was 20 she began investing $1000 a year into an RRSP paying an average of 6%/a compounded annually. Grant on the other hand, did not start to invest until age 50. He made an annual deposit of $3000 beginning at age 50. The average interest rate he received on his investment was 8%/a compounded annually. Solve each of the following using the TVM solver (graphing calculator finance application)

I need help doing this even with formulas doesn't have to be with graphing calculator

1) What amount does each have today?

For this question I don't know which formula I should be using or solving for in the calc Present Value or Future Value?

2)What should Grant have invested each year in order to have the same amount as Kera at age 75?

I don't know what to do for this part, how would you use the calculator alone trial and error?

3.) If Grant could only afford to invest $3000 per month, what average rate of interest would result in his saving the same amount as Kera? I did this question and when i solved for interest i got a negative number y?

 

[shmoe]

1) What amount does each have today?

For this question I don't know which formula I should be using or solving for in the calc Present Value or Future Value?

Future Value. In this case 'today' is when they are 75. This is after all payments have been made (and gained interest)

2)What should Grant have invested each year in order to have the same amount as Kera at age 75?

I don't know what to do for this part, how would you use the calculator alone trial and error?

Kera has K dollars at age 75 (you'll know K from the last part). Grant has an annuity from age 50 to age 75 at 8% interest and payments of some undertemined amount x that will make this annuitiy equal to K at age 75. Solve for x (you've seen this type of problem before I'm sure).

3.) If Grant could only afford to invest $3000 per month, what average rate of interest would result in his saving the same amount as Kera? I did this question and when i solved for interest i got a negative number y?

Same setup as part 2) except you know x=3000 and the interest is an unknown. Set it up and solve for the interest. This will take trial and error or some kind of program. This may be the TVM thingie you mentioned?

Ahh, I think there's a typo in part 3) that explains your negative answer. Grant can probably afford $3000 per year, not per month.

 

[aisha]

Thanks yes there was a typo in 3 everything is fine I just handed the assignment in hope i get good