2. In class we talked about the power of compound interest. This questions illustrates this. While the last thing on your mind at this point in your life is retirement, it is never too early to begin thinking about it! Suppose you intend to work full time from the age of 22 until you retire at 70 . Assume you can earn a risk-free rate of return of 5% in a retirement savings account. Consider two different approaches to saving: - Early bird: You save $5,000 a year for the first 15 years of your working life, and then you stop saving and let your savings accumulate interest until you retire. - Late bloomer: You do not save at all for the first 15 years, and then save $5,000 a year for the next 33 years until you retire. Notice that under the late bloomer approach you save for more twice the number of years than under the early bird approach, and therefore end up saving more than twice as much over your lifetime (33x$5000= $165,000 vs 15x$5000=$75,000) Which approach to savings leads to the bigger nest egg upon retirement at age 70? Explain