Thinking Quantitatively Project 6: SalCalVal
Sal, Cal and Val are triplets. Sal gets a paper route and decides to invest $2000 a year in a mutual fund which averages a 10% annual return. Sal only makes deposits for 5 years and then leaves the balance to compound until retirement at age 65. Cal is impressed by Sal’s bank account, gets a job in college and dutifully makes deposits into the same mutual fund for 8 years and then leaves the balance to compound until retirement at age 65. Val partied a lot growing up, but then gets a good job at the age of 27 and diligently makes deposits all the way to retirement at the age of 65.
- Before trying to recreate the worksheet below you must understand where the numbers came from. Determine how the $4,620 was computed.
- Open Excel and format it similarly to the example below. Include a cell at the top for the growth rate of 10%. You will click on the 10% in your formulas!
- Recreate the spreadsheet below which tracks the growth of each person’s investment and extend it all the way down to age 65. You must take into account both the deposit and the growth rate of 10% each year. You may insert extra columns if this helps you break the problem down into simpler pieces.
- Compute how much each person invested and how much each person gained in interest. Who ends up with the most money at age 65?
- Play with the annual interest rate, and see if this affects the outcome for the question you just answered. Determine the interest rate where Sal and Val end with the same amount of money.