Bob & Smith: There are two close friends named Bob & Smith and their ages are the same, 22 years old. Bob has just begun his periodic beginning-of-the-year investment of $2,000 every year yielding 12 % annually and continues investing for 6 yrs, and then somehow decides to stop investing after 6 years. Smith however has not done any investment for the first 6 years. Now, having heard Bob stopped investing, Smith thought it is now his time and turn to start to invest the same periodic beginning-of-the-year investment of $2,000 earning the same 12% annually as Bob did. Btw, Bod did not withdraw his money balance from the investment pool so that the balance would grow at the annual 12% continuously. Again, assuming the investment yields 12% annually and therefore the reinvestment rate of return is also 12% for both Bob and Smith:

Question

1) Can Smiths balance ever catch up with Bobs?

2) How long does it take for Smiths balance to catch up with Bobs?

3) What are Bobs balance and Smiths at their retirement age of 65?

4) What have you learned from this story?