Bill starts a retirement fund at age 21 and plans on depositing ...

[penza]

Bill starts a retirement fund at age 21 and plans on depositing equal annual amounts on each birthday, starting
  at age 21, and ending at age 60. He wants to have 2 million at age 60. John starts his fund on his 30th birthday.
 
  He wants to deposit equal annual amounts on each birthday starting on his 30th birthday and ending on his
  60th birthday. John wants to have 2 million at age 60. If the investment funds earn 10 per year, calculate the
  amounts the Bill and John respectively will have to save each year (rounded to the nearest dollar) to meet their
  goals. Comment on the difference.

Question 2

Which of the following is NOT a valid theory that attempts to explain the shape of the term
  structure of interest rates?
 
  A) the Fisher Effect theory B) the unbiased expectations theory
  C) the liquidity preference theory D) the market segmentation theory

[GCabra]

Answer to Question 1

Bill will need to make deposits of 4,519 per year, while John will need to make deposits of 10,992 per year. These
amounts are based on the future value of the annuity in each case of 2,000,000, N = 40 for Bill and N = 31 for John,
with I = 10. The difference illustrates the importance of compounding and the need to begin saving early. John's
annual deposits are more than twice Bill's deposits, even though the number of years is only 9 fewer, or less than 25
less.

Answer to Question 2

A