You have $7500 cash that you would like to invest now in 2020. Normally, you would...

 

Transcribed Image Text:

You have $7500 cash that you would like to invest now in 2020. Normally, you would deposit the cash in a savings account that pays an annual interest rate of 2.5%. However, you are considering the possibility of investing your money in the stock market. You anticipate that you can get an annual rate of return of 7% from the stock market. If you think inflation will be 1.75% per year for the next 12 years, how much more money can you earn at the end of 12 years if you invest in the stock market? Express your answer in terms of both actual dollars and real dollars (base 2020). You have $7500 cash that you would like to invest now in 2020. Normally, you would deposit the cash in a savings account that pays an annual interest rate of 2.5%. However, you are considering the possibility of investing your money in the stock market. You anticipate that you can get an annual rate of return of 7% from the stock market. If you think inflation will be 1.75% per year for the next 12 years, how much more money can you earn at the end of 12 years if you invest in the stock market? Express your answer in terms of both actual dollars and real dollars (base 2020).

Answer rating: 100% (QA)

To calculate the difference in earnings between investing in a savings account and investing in the ... View the full answer