Compound Interest Value Question 1:

Explain which of the two options below results in a lower balance after 6 months on an investment of $6,000.

• Annual simple interest of 12% applied at the end of 6 months.
• A monthly interest rate of 1% applied at the end of each month and before the start of the next month. (Compound interest at 12% per year, compounded monthly.)

Discuss why the two methods result in different results.

In what circumstances might you select one option over another?

Question 2:

An increase in value of any collection is not guaranteed for a variety of reasons. If you are a collector, please use your own collection to answer the following questions. If you are not a collector, research to find a collection for your answers.

a. What are some of the factors that could cause the value of your collection to drop in the future?

b. What questions should an investor ask before investing in anything?

c. If no new memorabilia can be created with an autograph, how does the idea of scarcity increase the value of an item?