Answer:
Mark Johnson
At the end of six years, Mark will have:
= $26,945.
Explanation:
a) Data and Calculations:
Savings for the first year = $3,000
Annual rate of salary and savings increase = 4%
Interest rate = 9%
Savings for Year 2 = $3,120 ($3,000 * 1.04)
Savings for Year 3 = $3,245 ($3,120 * 1.04)
Savings for Year 4 = $3,375 ($3,245 * 1.04)
Savings for Year 5 = $3,510 ($3,375 * 1.04)
Savings for Year 6 = $3,650 ($3,510 * 1.04)
Year 1 Year 2 Year 3 Year 4 Year 5 Year 6
Savings $3,000 $3,120 $3,245 $3,375 $3,510 $3,650
FV factor 1.677 1.539 1.412 1.295 1.188 1.090
FV = $5,031 $4,802 $4,592 $4,371 $4,170 $3,979
Total FV = $26,945
Total principal contribution = $19,900
Total interest = $7,045
