Pocket Finance is a new phone app, designed to help non-experts make good financial decisions. One popular feature tells users, based on their age, how much they need to save each month in order to generate $500,000 by the age of 65. Assume a compound interest rate of 6% per annum compounded monthly.
(6 marks) If you are 20 years old, what size monthly deposits would Pocket Finance advise you to make? Round to two decimal places.
(5 marks) How much money will you accumulate by your 50th birthday? What will be the outstanding balance of the $500,000 target?
(8 marks) Referring to part (b), use EXCEL to set up a Schedule for the first 12 months of the investment. Attach the printout or copy your EXCEL schedule into your assignment submission.
(3 marks) Referring to the Schedule from part (c), how much interest in total will be earned over the first year of your investment? What will be value of your investment at the end of the first year?
(4 marks) Your 25 year-old friend Dave, who does not have the Pocket Finance app, has just won $250,000 in the lottery. He wants to invest his winnings at 6% simple interest per annum. How much interest will he earn by the age of 65? Based on his winnings and interest earned, will he become a millionaire?