Question
You have two investment options, to prepare for your retirement at age 68: A. On your 18 th birthday you make a $1500 deposit into
You have two investment options, to prepare for your retirement at age 68:
A. On your 18th birthday you make a $1500 deposit into a bank account paying 10% interest. You continue this through your 29th birthday. Thus you will have made twelve deposits on your birthdays at ages 18, 19, 20, 21, 22, 23, 24, 25, 26, 27, 28, 29. After the twelfth deposit you stop and leave the account alone.
B. You wait to start making deposits until your 30th birthday, but you then make the $1500 deposit every year up to and including the one on your 68th birthday.
- Develop a spreadsheet showing that on your 68th birthday, Investment A will yield $1.3197 million while investment B will yield $602,171.
- At what interest rate are the two investment plans equal?
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