Question
Question 8 (8 points). You have just invested $10,000 in your investing account. Assuming you earn a 10% rate of return per year and make
Question 8 (8 points). You have just invested $10,000 in your investing account. Assuming you earn a 10% rate of return per year and make no additional contributions, what will your account be worth when you retire:
a. in 30 years? (1 point)
b. in 45 years? Compare the results in part a with the one in part b. What is the conclusion you can make when the investment horizon is longer? (2 points)
Now, assuming you can boost your rate of return up to 15% per year and there are no additional contributions other than the original amount of $10,000, then, how much will you have when you retire:
c. in 30 years? (1 point)
d. in 45 years? (1 point)
e. Compare the results in parts a, b and the ones in part c, d. What is the conclusion you can make when the rate of return is higher? (1 point)
Now, assuming you can earn a 10% rate of return per year for the first ten years. After that, you can earn a 20% rate of return per year for the remaining years. There are no additional contributions other than the original amount of $10,000, then, how much will you have when you retire:
f. in 30 years? (1 point)
g. in 45 years? (1 point)
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