Investments and Loans Practical Insight - Special Academic Support

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The ability to dispose of money and other resources in a proper way predetermines the wellbeing of every person. One might have 1,000 dollars and turn it into the extensive network of manufacturing facilities, while another person might lose the whole number of millions of dollars without an understanding of where to invest the money, how and on what conditions to lend and borrow money. Therefore, the ability to calculate the potential developments of this or that direction of money investment can turn out to be vital for the wellbeing of every person (Hease, Hease, and Hease, 2008, p. 80). This paper considers the investment and loans strategies using the real-life situation.

As a student, I am permanently thinking over my future career development and building of my personal life. It is natural that thinking of a place to work, I am also caught up by the thought about the means of transportation. Planning to buy a house for my future family, I understand from the materials of this course how important it is to have the proper money investment strategies at my disposal. Currently, my assets consist of $5,000, and I need to work out a strategy to understand the total amount generated on my compound interest rate deposit after I invest the present sum of money during 10 to 15 years at the rate of 8% compounded annually.

To achieve the goal stipulated above, I will need to have the bank deposit with the annually compounded interest rate of 8% that will allow me to generate the sum of money from the principal of $5,000. After this, I will have to adjust the sum to the real estate market prices at the period when the deposit lock away time expires. Thus, to calculate the sum generated (F_v) after one year of investing on the deposit at the given interest rate of 8% compounded annually, it is necessary to multiply the principal (P) sum of $5,000 by the interest rate ratio (R) (Hease, Hease, and Hease, 2008, p. 85):

F_v = P x R

F_v = $5,000 x (1 + ^0.08/₁)¹= $5,000 x (1.08)¹= $5,400

Accordingly, the above calculations, the annually compounded interest rate of 8% if applied to the principal sum of $5,000 will generate $400 after a year of investing (Hease, Hease, and Hease, 2008, p. 85). Further on, if the rate of the compound interest will remain stable during the whole period while the deposit is locked away, i. e. 10 to 15 years, the sum generated on the deposit will be calculated one of the following ways (Hease, Hease, and Hease, 2008, p. 85):

F_v = $5,000 x (1 + ^0.08/₁)¹⁰F_v = $5,000 x (1 + ^0.08/₁)¹⁵= $5,000 x (1.08)¹⁰ = $5,000 x (1.08)¹⁵= $54,000 or = $81,000

Therefore, the investment strategy that should be applied in my case for me to be able to buy a house in 10 to 15 years from now is the opening of the long-term deposit with an interest rate of 8% compounded annually (Hease, Hease, and Hease, 2008, p. 81). Such an investment strategy will allow generating the necessary sum of money on the deposit, provided the interest rate remains stable during the whole period while the deposit is locked away.

Reference List

Hease, M., Hease, R., and Hease, S. (2008) Mathematics for Year 12: Mathematical Applications. Haese & Harris Publications; 2nd edition.

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