Explain effect of compound interest

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Reference no: EM131949308

Mr. Richards has a new client will earn much higher returns than normal because of their risk profile. The client will role $75,000 into an account with the firm and then they will make additional monthly deposits of $2,000 per month for the next 25 years. He also wants to illustrate the returns for a bank CD at 2%, market returns at 4% and normal returns for him of 8%. To further illustrate the power of his returns, he wants to show the returns at 12% for 20 years.

Excel: Use the standard TVM setup. Remember M is 12 for monthly. Setup a summary table showing the rates and overall portfolio value and one additional 20-year return. Also show the overall growth rates as in the previous analysis.

Written: Briefly describe the analysis that you have performed and explain the effect of compound interest. Explain how the compound interest and growth rates differ across the different returns. Provide 3 summary points to sell this client for Mr. Richards.

Reference no: EM131949308

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