Finding the Investment Gain for Retirement Planning

[xcbrina3206]

I am new to this, so I am not sure how to work this very well....



but I am working on a problem for an online class, and I have to find a variety of different items... I attached the file, I am not sure if it worked or not...

But the obvious column I'm looking for is the Investment Gain... and I can't figure out how to get it right.... the first couple answers are listed in the book, which is why I know my answers aren't coming out right. They first couple answers in the column are $104, $320, $658, $1127, $1737

If anyone can help I would appreciate it very much!

[protonLeah]

Please take another look at your "Total Invested..." column (E). Why is the second entry only 2600? What happened to the interest earned the previous year?

[xcbrina3206]

That is how the book told me to do it.... it is just adding the annual contributions together each year... so you add 1300 each time.

[protonLeah]

No. The interest you received last year (104) earns interest this year. So, for the second year then, you earn 0.08 interest on the 104 paid to you last year in addition to the 0.08 earned on the total of 2600 deposited.

(2600+104) * 0.08 = 216.32 not 320, and the value at the end of year 2 is 2,920.32.

You got 320 because you calculated:
(C12+E12)*Expected_rate_of_return; where C12 = 1404 (last year's contrib + int), and E12 = 2600 (Year 1, contrib + year 2 contrib) so that year 1 is added twice and your result is 320 instead of 216...