Karen and her twin sister, Kathy, are celebrating their 30th birthday today. Karen has been
saving for her retirement ever since their 25th birthday. On their 25th birthday, she made a
$5,000 contribution to her retirement account. Every year thereafter on their birthday, she
added another $5,000 to the account. Her plan is to continue contributing $5,000 every year
on their birthday. Her 41st, and final, $5,000 contribution will occur on their 65th birthday.
So far, Kathy has not saved anything for her retirement but she wants to begin today. Kathy's
plan is to also contribute a fixed amount every year. Her first contribution will occur today,
and her 36th, and final, contribution will occur on their 65th birthday. Assume that both
investment accounts earn an annual return of 10 percent p.a.
How large does Kathy's annual contribution have to be for her to have the same amount in her
account at age 65, as Karen will have in her account at age 65?