Financial

QUESTION 1

Why should invest in a retirement savings plan? The answer of this question is quite easy, to have funds available for us in retirement. However, it is not risk free for exampleeconomics conditions could change or a company goes out of business. We need to insure the way to minimize the risk, one way to do it is make an investment in a special bank account. This option in paperseems be a less risky decision because we are aware of the tolerance of risk and how the investment works also we know a proximity amount of our potential return.

The special bank savings account canonly be used as a super fund and for your super contributions. It is an account offered by a financial institution. The funds are growing through the time using a compound interest and calculated onthe savings account, it is not an investment. Usually charge less fee than super fund or have got flat fees and those factors are the only thing can be reduce your total balance, this depends of theprovider. You would pay lower taxes, because your contribution comes out before taxes are calculated

For a retirement savings account can be hard to stay ahead of the inflation over a long period,moreover is hardest when a crisis period occur like the financial global crisis. To counteract this situation the individual need to contribute far more that they have in the past.

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Animportant point to mention is that your savings are safe, this mean that by the year of 2008 the Australian Federal Government announces plans to guarantee all deposits made at Authorised Deposit takingInstitutions regulated by the Australian Prudential Regulation Authority.

To answer the first point we use the compound interest, with it, interest is calculated not only on the deposits you make butalso on the accumulated interest from prior periods. First step is indentifying which information we have:

PV= $ 10,000.00

n= Period of time is 20 years = from 44 to 66

i= interest rate =...