Answer:
$2,792.38
Explanation:
According to the scenario, computation of the given data are as follow:-
For computing the difference, first we have to compute the future value after that PMT value should be find out
Future value = PMT × FVIFA
FVIFA = [(1 + interest rate)^number of years - 1] ÷ interest rate
For S
PMT = $100
Time = 40 years
Rate = 8% = 0.08
Future value of Susan = $100 × FVIFA (0.08)40
= $100 × 259.057
= $25,905.7
For J
PMT = $100
Time = 40 years
Rate = 10% = 0.10
Future value of Jeff=100 × FVIFA (0.10)40
= $100 × 442.593
= $44,259.3
Future value of Deposit made by Susan = $25,905.7
Future value of Deposit made by Jeff = $44,259.3
Annual withdraw by X and Y:-
Now PMT is
PMT = PV ÷ PVIFA
PVIFA = [1-1 ÷ (1 + interest rate)^number of years] ÷ interest rate
Present value of Susan= $ 25,905.7
Time = 15 years
Rate = 8% = 0.08
PMT= $25,905.70 ÷ 8.5595 = $3,026.54
Present value of Jeff = $44,259.3
Time = 15 years
Rate = 10% = 0.10
PMT=$44,259.3 ÷ 7.6061 = $5,818.92
Payment of Susan (X) = $3,026.54
Payment of Jeff(Y) = $5,818.92
Difference between Susan(X) and Jeff(Y) is
= Payment of Jeff(Y) - Payment of Susan(X)
= $5,818.92 - $3,026.54
= $2,792.38
