Project 7 - Finance Name: _________________________ This project has two problems centered around finance - one question about the mathematical explosion of compound interest and the other about the stock market. Enjoy!

Problem 1 To get started, please watch this short video. The table that Dave talks about in the video is featured below. 1. Write a few sentences summarizing and explaining what Dave was talking about. Why is compound interest so important? Why is time so important?

2. Let's use mathematics to see why time is so important when it comes to saving for retirement. Suppose you have $10,000 to invest in a mutual fund that averages a 12% annual return.

a) After 5 years, what is the value of the fund? Explain or show your work.

b) After 10 years, what is the value of the fund? Explain or show your work.

c) After 20 years, what is the value of the fund? Explain or show your work.

d) It looks like time doubles in parts b) and c) from 10 to 20 years. Does the account value also double? If not, why not?

The Story of Ben & Arthur THE POWER OF COMPOUND INTEREST AGE BEN INVESTS: ARTHUR INVESTS: Both save $2,000 per year 19 2,000 2,240 0 at 12% Ben starts at age 19 20 2,000 4,749 0 21 2.000 7,558 0 and stops at age 26, while 22 2,000 10,706 0 0 23 2,00 14,230 0 Arthur starts at age 27 and 24 2,000 18, 178 0 0 25 2,000 22,599 0 0 stops at age 65. 26 2,000 27,551 0 27 30,857 2.000 2,240 28 34,560 2,000 4,749 Ben stops investing; 29 38, 708 2.000 7.558 Arthur starts investing 30 43,352 2.000 10,706 0 48,554 2,000 14.230 0 54, 381 2,000 18,178 60,907 2 000 22 599 68,216 2000 27.551 76,802 2.000 33.097 85,570 2.000 39.309 95,383 2 000 46,266 107,339 2000 54 058 120,220 2,000 62,785 134,646 2.000 72.559 ANNUAL 150,804 2,000 83,506 $2,000 SAVING 168,900 2,000 95.767 189,168 2,000 109,499 211,869 2,000 124, 879 : 12 MONTHS 237,293 2.000 142, 104 265,768 2.000 161,396 297,660 2.000 183,004 333,379 2.000 207.204 $167 373,385 2.000 234,308 418,191 2.000 264.665 468,374 2.000 298,665 Saving $2,000 a year 524.579 2.000 336,745 works out to only 587,528 2000 379,394 $167 per month! 658,032 2.000 427, 161 736,995 2,000 480,660 825,435 2.000 540,579 924,487 2,000 607, 688 1,035,425 2,000 682,851 1,159,676 2,000 767,033 1,298,837 2.000 861,317 1,454,698 2.000 966.915 1,629,261 2,000 1,085,185 1,824,773 2,000 1.217.647 2.043.746 2000 1,366.005 2,288,996 2,000 1,532, 166 Ben invested Arthur invested $78,000 ONLY $16,000. and NEVER CAUGHT UP