Two best friends, Ben and Arthur, who grew up together in the same neighbourhood, are the same age and they graduated from high school together. At age 19, both friends started working at different companies but earning similar salaries. Ben started investing $2,000 at the beginning of each year from his salary for retirement, at a rate of 12%, while Arthur decided to "enjoy life" with his salary. After 8 years (age 27) the friends had a discussion about their financial happenings over the period. Their explanation for doing what they did with money was so convincing to the other. Arthur changed his focus and wanted to do more with his income, so he started investing $2,000 for retirement at the beginning of each year at 12% until he retired at age 65 (39 years later). Ben realized he was not having as much fun as Arthur and decided to stop investing for just a few years. However,he never managed to invest another dollar towards retirement at age 65. Ben did not touch any of his previous investment and it continued to earn interest over the next 39 years.
Two best friends, Ben and Arthur, who grew up together in the same neighbourhood, are the same age and they graduated from high school together. At age 19, both friends started working at different companies but earning similar salaries. Ben started investing $2,000 at the beginning of each year from his salary for retirement, at a rate of 12%, while Arthur decided to "enjoy life" with his salary. After 8 years (age 27) the friends had a discussion about their financial happenings over the period. Their explanation for doing what they did with money was so convincing to the other. Arthur changed his focus and wanted to do more with his income, so he started investing $2,000 for retirement at the beginning of each year at 12% until he retired at age 65 (39 years later). Ben realized he was not having as much fun as Arthur and decided to stop investing for just a few years. However,he never managed to invest another dollar towards retirement at age 65. Ben did not touch any of his previous investment and it continued to earn interest over the next 39 years.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
Related questions
Question
With the photo attached, answer the following
a. In your assessment, who will have the higher retirement value at age 65, Ben or Arthur (no calculation required)? Justify your response.
NO EXCEL....full working
DO NOT USE EXCEL TO ANSWER
Transcribed Image Text:Case Scenario:
Two best friends, Ben and Arthur, who grew up together in the same
neighbourhood, are the same age and they graduated from high school together. At
age 19, both friends started working at different companies but earning similar
salaries.
Ben started investing $2,000 at the beginning of each year from his salary for
retirement, at a rate of 12%, while Arthur decided to "enjoy life" with his salary.
After 8 years (age 27) the friends had a discussion about their financial happenings
over the period. Their explanation for doing what they did with money was so
convincing to the other.
Arthur changed his focus and wanted to do more with his income, so he started
investing $2,000 for retirement at the beginning of each year at 12% until he retired
at
age
65
(39
years
later).
Ben realized he was not having as much fun as Arthur and decided to stop investing
for just a few years. However,he never managed to invest another dollar towards
retirement at age 65. Ben did not touch any of his previous investment and it
continued to earn interest over the next 39 years.
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