We talked in class about the power of compounding to increase the FV of a sum. The historical average yield of the US stock market is 12% (sometimes higher, sometimes a lot lower, but this is the overall average). Two twin brothers, Ben and Jerry, are starting to think toward the future, and put away some money into the stock market for retirement (use 12% as your compounding rate). Ben starts at age 19, and invests $1000 a year at the end of each year. He does this for 10 years until he is 28, then stops and puts nothing else in the account, leaving the balance to continue to grow with no new payments. His brother Jerry sees what Ben is doing, and thinks that is a good idea. He starts at age 29. He knows he is behind, so he doubles up and invests $2000 a year for the next 37 years, until he is 65. For each brother, tell me: 1B) How much total did Ben invest? 11) How much total did Jerry invest? 2B) How much money will Ben have to retire on when he reaches age 65? 21) Jerry? Now redo your calculations, but increase the amount they each put in each year up to the IRA limit. $6000/yr. and use a return of only 8% per year. These will be 38) and 3.) for total investment, and 4B) and 4J) for total amount in the IRA at age 65. Then write a paragraph or so about what this means to you in your personal finances, and what you should do about it This will count as two 10-point homework assignments, 8 points for your Ben information, and 8 points for your Jerry information. The paragraph is worth 4 points total, and will be divided up between the two HW grades to finish out the 10 point totals for each. Investments YEAR AGE $1000 $1000 $1000 $1000 $1000 $1000 $1000 $1000 $1000 $1000 No more $2000 deposits $2000 $2000 Continues depositing all these years $2000 $2000 BEN JERRY 1 2 3 4 5 6 19 20 21 22 23 24 > 25 DN 009 10 11 12 13 26 27 28 29 30 31 14 to 45 46 47 32 to 63 64 65