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Project $7$: Investments

B$.$ Assignment

Introduction: Our textbook discussed compound interest in Chapter $4($Use Sections $4\mathrm{.}2$ and $4\mathrm{.}5$ as references$).$ The concept of compound interest is used in the area of investments. This project will investigate that process.

Directions: For this project, you will be using the following compound interest formula:

$A=P(1+\frac{r}{n}{)}^{nt}$

which gives the future value, $A($in dollars$),$ of the account $($or investment$)$ after $t$ years with $n$ compounding periods per year when an initial deposit of $P$ is invested at an annual rate of $r.$

The Original Investment

Suppose you are interested in beginning to invest over a long period of time. There are many different types of investments with many different factors affecting when deposits are made and when interest is calculated. For this project, we will be using a one$-$time deposit and investigate how the balance of the account is affected over time. The original investment amount will be $$1250.$ The annual interest rate will be $2\mathrm{.}75\%$ and will be compounded annually.

Write a paragraph to discuss what the total amount in the account after $10$ years.

Write a paragraph to discuss how long it would take for the amount in the account to reach a total of $$3000.$

Write a paragraph to discuss what the total amount in the account would be if you deposited $$2500$ today and did not withdraw any money until you reach the age of $65.$ Use the same interest rate as the original investment.

Alternate Investment

To be a good steward of our money, it is important to consider alternative investments that might be available. A few options would be savings accounts, certificates of deposit and retirement accounts. Each type of investment also includes many different variables and requirements.

Research at least two of the alternative investment types. Be careful to identify the specific requirements and conditions for each of the investments you select. Using four or more sources outside of our textbook, write a $400-600$ word report to describe your findings and discuss a sample scenario for one of the alternative investments. Include the justification of the specific values of the initial deposit, the interest rate and the time period of the scenario you create.