1. The Smiths and the Browns are two couples who are considering saving for retirement. The Smiths contribute $2,500 per year for 10 years starting at age 25. The Browns dont begin saving until age 35, but they contribute $2,500 for 30 years. Assume both couple earn 7% per annum on their investment.
2. At age 65, which couple accumulates more money? How much have they accumulated?
3. What if the interest earned had been 5% per annum, which couple would accumulate more money? How much would they have accumulated?
4. What lessons do you learn from this simple situation and how can these concepts be applied to your personal financial situation and as a manager of a company?
5. What is your personal philosophy of investing for the future? Do the principles demonstrated from this case reinforce or conflict with your personal investment philosophy?