need to draw a graph of the 5 force of interests with time t and always pick up
ID: 2708503 • Letter: N
Question
need to draw a graph of the 5 force of interests with time t and always pick up the highest force of interest to invest your money
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You wish to invest $10,000 over 10 years. Available to you are 5 different funds. At any time you may transfer money from one fund to another without penalty or transaction fee. To optimize the money you receive at the end of 10 years you realize that you want all of your money in the fund with highest force of interest at any give time. Remember the force of interest Conversely, given you can find that investing $1 from t1 to t2 equals Fortunately, for each of the five funds you know either its accumulation or force of interest function. These are given as There are three parts to this problem List the time intervals where you should invest your money in each fund to maximize earnings. Calculate the amount of money you have at the end of 10 years using the optimal strategy. Calculate the amount of money you have at the end of 10 years if you invested your money exclusively in one fund. Do this for all five funds.Explanation / Answer
If you wanted to be really aggressive, I'd suggest a 20% stock portfolio with dividend paying stocks, 70% in a 1 year CD, and about 10% in intermediate term bonds (like 5 year TIPS). That's because if interest rates rise rapidly, the TIPS can go down a lot (although not as much as the 10 year variety). This gives you $12,000 in cash-like instruments (since you can take it out for a 3 month penalty, sometimes 6 months), $1,000 in bonds that fluctuate with interest rates, and $2,000 exposed to the market fluctuations.
What's the purpose for the money? If you need to buy a car, I really like CDs. If you want to pay for something like an education (and you are eligible for adequate financial aid thru grants and maybe even subsidized loans), you may want to look at having up to 40% equities and 50% in 5 year bonds (like TIPS or a bond index fund with a duration of 7 or less), and only 10% in a 1 year CD. Are you living with folks or live alone?
If you own a home with a mortgage or have children, there's no other place than a savings account (look at checkingfinder.com and Pentagon CU for CD rates). Bankrate.com might also have some tips. In fact, get it up to $24K, at least.
In any event, good luck and best wishes. How you invest (or save) the money really depends on your goals and whether it is within one year, at least one year, or at least one year (and only if a certain condition or emergency occurs).
LOL on gold; the 30 year real return on Gold is (3.25%); it means that if you put your money in gold in 1979 and kept it in, you would have lost 63% of your money. In contrast, by owning stocks, you get an 805% (923.33/101.99 - 1) return. So do you rather an 805% return (3800% from 1932 to 1969) or a 1/2% gain? And after inflation, you triple your money by having invested in stocks or a 199.92% gain (assumes 3.75% inflation). So do you rather triple your money by investing in stocks or needing your money to triple to get back to even by investing in gold?
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