Individual And Household Choices In A Market Economy Worksheet

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High School Social Studies
Individual and Household Choices in a Market Economy
Economics
Teacher Resource
1
The Time Value of Money
The following chart shows the investment activity of two investors. Both investors are the same
age. Investor “A” invests $2000 a year for 10 years, beginning at age 25. Investor “B” invests
$2000 a year, for 31 years beginning at age 35. Both receive a 9% fixed rate of return,
compounded monthly. Interest is left in the account to earn interest on itself.
Age
Contributions
Year End Value
Contributions
Year End Value
Investor “A”
Investor “A”
Investor “B’
Investor “B”
25
$2000
$ 2188
$0
$0
26
2000
4580
0
0
27
2000
7198
0
0
28
2000
10,061
0
0
29
2000
13,192
0
0
30
2000
16,617
0
0
31
2000
20,363
0
0
32
2000
24,461
0
0
33
2000
28,944
0
0
34
2000
33,846
0
0
35
0
37,021
2000
2,188
36
0
40,494
2000
4,580
37
0
44,293
2000
7,198
38
0
48,448
2000
10,061
39
0
52,992
2000
13,192
40
0
57,963
2000
16,617
41
0
63,401
2000
20,363
42
0
69,348
2000
24,461
43
0
75,854
2000
28,944
44
0
82,969
2000
33,846
45
0
90,752
2000
39,209
46
0
99,265
2000
45,075
47
0
108,577
2000
51,490
48
0
118,763
2000
58,508
49
0
129,903
2000
66,184
50
0
142,089
2000
74,580
51
0
155,418
2000
83,764
52
0
169,997
2000
93,809
53
0
185,944
2000
104,797
54
0
203,387
2000
116,815
55
0
222,466
2000
129,961
56
0
243,335
2000
144,340
57
0
266,162
2000
160,068
58
0
291,129
2000
177,271
59
0
318,439
2000
196,088
60
0
348,311
2000
216,670
61
0
380,985
2000
239,182
62
0
416,724
2000
263,807
63
0
455,816
2000
290,741
64
0
498,574
2000
320,202
65
0
545,344
2000
352,427
Value at Retirement
545,344
352,427
(Less Total Contributions)
(20,000)
(62,000)
Net Earnings on Investment
525,344
290,427
1
Taken from National Institute for Consumer Education. Consumer Approach to Investing. Ypsilanti, Michigan:
Eastern Michigan University, 1992.
September 13, 2002
SCoPE SS090708 Page 1 of 3

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