Purchase Solution

Finance Concepts

Not what you're looking for?

Ask Custom Question

If you have $10 today, you can invest that $10 and earn interest. If, for example, you earn 5% interest, you will earn $0.50 interest and have a total of $10.50 at the end of one year. If you invest the $10.50 for another year, you will earn $0.53 interest and have a total of $11.03 at the end of the second year. In year two, you earned $0.50 interest on your initial $10 and $0.03 interest on the $0.50 interest earned in year one. Earning interest on interest is called compound interest. The longer you leave your money invested, the greater the compounding effect becomes.

Oftentimes, people project how fast their money will grow and get the idea that they will become so much wealthier sometime in the future. What they often forget is that while their money is growing, the prices of everything they buy are increasing. To really get ahead, your money must grow at a faster pace than the prices of the products you buy.

You would like to take a cruise in six years. The cruise currently costs $4,250. You expect the price to increase by 4% annually. You can earn 5% on your savings. How much do you need to save at the end of each month so you will be able to afford your cruise in six years?

You invest $250 in your savings account at the end of each year and earn an average of 6% per year in interest. How much will you have in your savings account at the end of forty years?

You want to have $40,000 to buy a new boat in six years. How much do you have to save at the end of each year to reach this goal if you earn 5% a year on your savings?

Purchase this Solution

Solution Summary

Investment questions are noted.

Solution Preview

Finance Concepts
________________________________________
If you have $10 today, you can invest that $10 and earn interest. If, for example, you earn 5% interest, you will earn $0.50 interest and have a total of $10.50 at the end of one year. If you invest the $10.50 for another year, you will earn $0.53 interest and have a total of $11.03 at the end of the second year. In year two, you earned $0.50 interest on your initial $10 and $0.03 interest on the $0.50 interest earned in year one. Earning interest on interest is called compound interest. The longer you leave your money invested, the greater the compounding effect becomes.

Oftentimes, people project how fast their money will grow and get the idea that they will become so much wealthier sometime in the future. What they often forget is that while their money is ...

Purchase this Solution


Free BrainMass Quizzes
Importance of Play for Children

Play is integral for children's education and development. This quiz briefly highlights the neuroscience supporting the importance of play-based learning.

The PLAY Project: Autism Intervention Model

Parents, therapists, caregivers, providers, and special education teachers who are exploring early intervention models should take this quiz about the PLAY Project. This quiz will provide a very brief introduction.

DIR/Floortime Model for Therapy

This quiz provides a brief introduction to the DIR/Floortime Model for therapy. This process focuses on meeting a child at his or her developmental level and then extending learning.

Ages and Stages of Play

This quiz provides a brief overview of the typical ages associated with each level of play. Understanding the ages and stages of play is integral knowledge for anyone with a role in young children's lives.

Grit and Perseverance in Children

Building small humans is a daunting task. There is nothing more important than our impact on those around us, especially the smallest ones. This quiz offers a brief overview of different parenting modes and how to provide experiences for children to thrive!