Compounding intrest, etc.

Isaac44

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Nov 24, 2006
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If someone begins working at $10 an hour. Each year he gets a raise of $1/hour. He's working 40 hours a week and 52 weeks a year. He deducts 10,000 a year for living expenses, and puts the rest in an investment that yields 4% compounded annually.

How many years will it take him to have saved $300,000 in his investment?

Thanks a bunch!

Does this make any sense?

Make 3columns. The first column is how much he makes (his hourly rate times 2080 hours/year worked) The second column is how much he puts in his savings account. The third column is how much he has in the acount at the end of the year.

Start on the 1'st row with $20800 $10900 and $10900. Then just keep adding rows for weach year until the total in the 3'rd column is $300,000
 
Start on the 1'st row with $20800 $10900 and $10900. Then just keep adding rows for weach year until the total in the 3'rd column is $300,000

Your method will work as long as you don't forget to add in the 4% interest each year.
How is your class being taught to approach these problems? What topics are you learning? Have you been studying arithmetic and geometric sequences and combined sequences? Are you doing all the problems by hand or using calculators?
 
Real Question

How is the $10,000 withdrawn? Annually or $10,000/52 = 192.31/week or something else?

Goofing Off

10*40*400*.7 = 280 Are you sure there is enough after taxes?
 
Not sure why you have 10900 as 1st year's investment; should be 10800;
anyhow, your "columns" method would work like this:
(col 1 = year number, col 2 = year's earnings, col 3 = amount invested, col 4 = interest at 4%, col 5 = worth so far)

Code:
1: 20800  10800        .00  10800.00
2: 22880  12880     432.00  24112.00
3: 24960  14960     964.48  40036.40
4: 27040  17040    1601.46  58677.94
...and so on; you'll hit ~319620 at end of year 12.

Of course, that assumes the annual investment is made at end of year only;
he will get some interest during the year in the account where he accumulates,
which I guess he can use for pizza and beer :wink:
 
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