Michael just graduated from college and has his first job. Hissalary is that of an entry-level employee, so he has to budget hismoney carefully. However, he does understand the need to save moneyfor the future.
A. Assume that hedeposits $600 at the end of each year for 10 years into aninvestment account earning 7%. He then stops making deposits anduses the money instead for house and car payments. How much will bein the investment account at the end of the 10-year period?
B. Assume Michaeldecides to keep the investment but does not make any additionalcontributions. How much will be in the account when he retires,after working for another 25-years?
C. Assume thatMichael does not begin saving until he has worked for 20 years. Ifhe plans to retire in 15 years from that time, how much would hehave to invest at the end of each year, in an account earning 7%,to equal the balance in the account in part B?
D. Calculate the total amount of cash that Michael would pay in under part C. Why is there a difference?