Posted: August 30th, 2020

Unit 7 Assignment – GM

1. You wish to deposit $500 per
month into an account for 36 months. Assume your interest rate is equal to the
prime interest rate.
a) How much do you have (total)
in the account after 36 months?
Question 2
(10 points)
2. Two people, Ella and Jane, decide
to start saving for retirement. Ella decides to invest $4000 a year into an
annuity at the age of 25. At the age of 35 she stops making investments and
just leaves the money there. Jane on the other hand, decides to start investing
$4000 a year at the age of 40 and invests that money for every year thereafter.
Assuming both retire at 70, and that the interest rate both get on their
investments is 10% (compounded annually) who has the most money in their
account at age 70? Explain why you pick the answer you pick.
Question 3
(10 points)
3. At the age of 30 you decide to
start saving money. At first you can only afford to deposit $200 per month.
However, at the age of 38 you are able to deposit $300 per month. Then at the
age of 45 you raise your monthly deposit again to $500 per month. Finally at
the age of 50 you get promoted to president of the company and are able to
deposit $2000 per month into the account. Assuming your account is earning
(prime interest rate + 4%) in interest, compounded monthly, how much do you
have in your account at the age of 70? Hint: Treat each time that you change
the deposit amount as a seperate annuity, and compute the future value (FV) on
each annuity seperately. Assume that each annuity earns compound interest
during the time it is not receiving deposits.
Essay
(15 points)
4. It is commonly assumed that
the stock market yields a 10% rate or return (on average) on investments made
in the market long term. Write an essay looking at the advantages and
disadvantages of investing in the stock market long term.
Requirements for essay
* Write your essay in this
document – do not save it in a separate file.
* You must clearly state your
position with well-structured paragraphs using proper grammar, spelling, and
sentence structure.
* This is not an “opinion”
question – you must offer evidence to support your position, using
properly-cited sources.
* Your answer must be between ¾-1
page in length.
* You must cite and reference at
least one source (book, website, periodical) using APA format. The required
website counts as one source
* You must state at least one
clear advantage and one clear disadvantage in your essay. However more
references are recommended.
* Hint: Some major stock market
events to consider are the crash of 1929, the flash crash of 2011, the dot com
era of the late 90's, the fast drop in value in 2007-2008 then
the market's climb back up in
2009 - 2012. Research into those may help you to get started.
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