Part 1) At age 30 you invest $1,000 that earns 8 percent each year. At age 40 yo
ID: 2728689 • Letter: P
Question
Part 1) At age 30 you invest $1,000 that earns 8 percent each year. At age 40 you invest $1,000 that earns 12 percent per year. In which case would you have more money at age 60? Please show your calculations and explain how you got to your result. Part 2) At age 25 you invest $2,500 that earns 8 percent each year. At age 40 you invest $2,500 that earns 11 percent per year. In which case would you have more money at age 65? Please show your calculations and explain how you got to your result. Also, please explain the value of investing earlier in life rather than later in life. Although this question may sound easy, give me examples and good evidence as to why it is beneficial
Explanation / Answer
Part 1:: Yield 8%, PV is 1000, N is 30 so FV is 10,062.65
Yield 12%, Pv is 1000, N is 20, so FV is 9646.29$
In case 1 of investment at age of 30 we will have more money.
Part 2:: Yield 8%, N is 40, PV is 2500, FV is 54311.3
Yield 11%, N is 25, PV is 2500, FV is 33963,69
In case 1 we will have more money.This is because of time value of money, money invested earlier in life will get more interest as the period is higher than for investment at latter age.
An example is the pension plan where we get the retirement benifit , the investment in pension fund must be from early age ti get higher income after retirement. Hence its benificial to invest at early age.