1) Anthony and Michelle Constantino just got married and received $30,000 in cash gifts for their wedding. How much will they have on their twenty-fifth anniversary if they place half of this money in a fixed-rate investment earning 8 percent compounded annually. Would the future value be larger or smaller if the compounding period was 6 months? How much more or less would they have earned with this shorter compounding period?
If they place half of this money, PV, in a fixed rate investment earning 8 percent compounded annually, the amount they will have, FV, on their twenty-fifth anniversary is $________?
The additional amount they would have earned with this shorter compounding period is $________?
2) Sarah Wiggum would like to make a single investment and have ?$1.9 million at the time of her retirement in 40 years. She has found a mutual fund that will earn 5 percent annually. How much will Sarah have to invest today? If Sarah invests that amount and could earn a 13 percent annual return, how soon could she retire assuming she is still going to retire when she has $1.9 million?
To have $1.9 million at retirement, the amount Sarah must invest today is $______?
If Sarah invests that same amount and earn a 15% annual return, she could retire in approximately ______ years?