Asked by Bryan Flores on May 11, 2024
Verified
To motivate individuals to start saving at an early age, financial planners will sometimes present the results of the following type of calculation. How much must a 25-year-old individual invest 5 years from now to have the same maturity value at age 55 as an immediate investment of $1,000? Assume that both investments earn 8% compounded annually.
Maturity Value
The total amount that will be paid out or received at the end of an investment period, including principal and interest.
Investment
The act of managing money with the purpose of earning extra revenue or profit.
- Forecast the future economic value of investments using compound interest.
- Determine the necessary initial investment to achieve a specific future value.
- Acquire knowledge about the role of duration in enhancing the value of investments and savings.
Verified Answer
JM
Learning Objectives
- Forecast the future economic value of investments using compound interest.
- Determine the necessary initial investment to achieve a specific future value.
- Acquire knowledge about the role of duration in enhancing the value of investments and savings.