Part 1

You have $100,000 you want to invest for the next 30 years. You are offered an investment plan that will pay you 10% per year for first the 20 years and 7% for the last 10 years.

Requirements to answer this question

Create a timetable for this problem.

How much money will you have at the end of the 30 years?

Does it matter if the investment plan pays you 10% per year for the first 20 years and 7% percent per year for the next 10 years? Why or why not?

How does the time value of money work?

How does interest on interest work?

How does simple and compounding interest work?

Part 2

Twenty years ago, you deposited $800 into an account. You earned 6% APR compounded annually for the first 15 years, and then 6% compounded monthly for the last 5 years. How much money do you have in your account today?

Create a timetable for this problem.

How much money do you have today?

Does it matter if the investment pay interest monthly and annaully?

How does the interest differ?