Reference no: EM133073505

1. What would be the value of your stock investments in 13 years if you invest $2,400 in stocks at the beginning of every year starting today? Assume stock investments have a rate of return of 12% per year. Assume you make a total of 13 investments (i.e., buy $2,400 of stocks today; then $2,400 more of stocks one year from today; $2,400 more of stocks two years from today; etc.) and your 13th investment of $2,400 in stocks is 12 years from today.

2. What be the total dollar return on your stock investment 13 years from today? (Hint: You would have invested a total over 13 years equal to 13 x $2,400, which is $31,200. Subtract $31,200 from your #1 answer.)

3. Instead of $2,400 each year, how much would you have had to invest each year in #1 if your goal was to have the value of your stock investments be $100,000 in 13 years?

4. Suppose you invest $2,400 each year in stocks as in #1 but your goal was to have the value of your stock investments be $100,000. How many years will it take to reach your goal?

5. What would be the value of your stock investments in 13 years if you invest $200 in stocks at the beginning of every month starting today? Assume stock investments have a rate of return of 12% per year. Assume you have a monthly return of 12% divided by 12 months, which equals 1% per month. Assume you make a total of 13 years x 12 investments/month, which equals a total of 156 monthly investments (i.e., buy $200 of stocks today; then $200 more of stocks one month from today; $200 more of stocks two months from today; etc.) and your 156th investment of $200 in stocks is 155 months from today. (Hint: you are investing the same total amount of money over 13 years as in #1. But because you're investing $2,400 at the beginning of each year in #1 and spreading out your investment at the pace of $200 each month in #5, your money has a little less time to work on getting a return. So your answer in #5 should be a little less than your answer in #1.)