Go to the Student Edition on this textbook’s Web site. In Chapter 10, find “Advantage of Early Investing.” You can enter data to compare three investment plans. For each plan, enter your regular end-of-period investment contribution, the frequency of contribution, the age range over which you will contribute, any initial amount already accumulated, and the projected rate of return. Compare the outcomes at age 65 for the following three alternatives:
(i) Plan A: Invest $100/month starting at age 25.
(ii) Plan B: Invest $200/month starting at age 35.
(iii) Plan C: Invest $400/month starting at age 45.
Enter 9% for the growth rate. The calculations will assume annual compounding. After completing the data entry, click on “Submit.” A new window opens presenting a table of future values at various ages for each investment plan. Scroll down the window to view an attractive graphic comparing the growth of the three plans.
a. Calculate the total of the nominal contributions under each plan. Compare them using a ratio A:B:C with terms reduced to small integers.
b. Compare the future values at age 65 in a ratio A:B:C. Reduce the ratio so that the smallest term is “1.”