Reference no: EM133150432

Question - (a) Your company will start depositing $8,000 every year in a bank account one year from now to accumulate sufficient money to replace a machine that is estimated to cost $50,000. If the bank offers an annual interest rate of 5%, how many years will it take your company to 16 accumulate enough money?

(b) On her 31st birthday, Sophie invests $1,000 into her employer's retirement plan, and she continues to make annual $1,000 payments for 10 years. So, her total contribution (i.e. principal) is $10,000. After making these 10 annual payments, Sophie then stops making payments into her plan and keeps her money in the savings plan untouched for 25 more years.

On the other hand, Peter starts putting money aside on his 415 birthday when he deposits $1,000, and continues these payments until he gets to be 65 years old. Peter's contributed principal amounts to $25,000 over this period of time. If Sophie's and Peter's retirement plans earn interest of 6% per year, how much will they have accumulated (principal plus interest) when they reach 65 years old?