Question
You started a job and would like to start investing some money for retirement. After the 1st year of working, you save $1500 and you
You started a job and would like to start investing some money for retirement. After the 1st year of working, you save $1500 and you invest it all in stocks. Because of your recent performance, you have been given a contract for the next 5 years with an annual increase (change) in salary by 5%. With this in mind, you plan to increase your savings with a rate of change of 5% also and invest that specific amount in the stock market. Essentially, there will be 6 (end-of-year) investments with a starting investment of $1500. How much will the investments be worth at the end of 6 years if the investment gives back an equivalent annual interest rate of 10%?
Draw the cash flow diagram.
Denote the downward arrow as a negative cash flow.
Denote the upward arrow as a positive cash flow.
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