Question
Compound interest accelerates the growth of your savings and investments over time. (a) Explain personal financial decisions that you have made that involve compound interest?
Compound interest accelerates the growth of your savings and investments over time.
(a) Explain personal financial decisions that you have made that involve compound interest? Provide relevant examples to support your answer.
(b) Sofea is considering two different savings plans. The first plan would have her deposit $500 every six months, and she would receive interest at a 7% annual rate, compounded semi-annually. Under the second plan, she would deposit $1,000 every year with a rate of interest of 7.5%, compounded annually. The initial deposit with Plan 1 would be made six months from now and, with Plan 2, one year from now.
What is the future value of the first plan and second plan at the end of 10 years? Which plan should Sofa use, assuming that her only concern is with the value of her savings at the end of 10 years? Show the workings to support your answer.
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