**Answer:**

**(a) No, there is a Shortfall = $2,965**

**(b) $25,202.95**

**Explanation:**

As provided current balance: $15,000

Current return on investment = 8%

Assumed this is compound interest as no amount is withdrawn in between.

Therefore, future value of $1 after 5 years @ 8% compounded per year =

1.469

**Value of $15,000 on the date of 40th Birthday = $15,000 1.469 = $22,035**

**There is a shortfall in the budgeted amount = $25,000 - $22,035 = $2,965**

If $500 annual contributions are made in the same account then value shall be:

Value of $15,000 = $22,035

Value of $500 = Value of $1 after 5 years = $6.3359

= $500 6.3359 = $3,167.95

**Then total balance in account = $22,035 + $3,167.95 = $25,202.95**