Investing for Retirement

Joseph Meyinsse, Southern University, Baton Rouge, Louisiana 70813
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This material was originally developed by Spreadsheets Across the Curriculum as part of its collaboration with the SERC Pedagogic Service.
Initial Publication Date: September 29, 2008

Summary

joseph_meyinsee

In this Spreadsheets Across the Curriculum activity, students build spreadsheets to study the effect of compound interest on accounts into which they deposit savings. They build a spreadsheet to examine the two basic cases: the future value of a single deposit, and the future value of an annuity. In both, they use the mathematical equation for future value to do the calculation, not the buiilt-in Excel function. The intention is for the students to see and work with the underlying mathematics. They apply their spreadsheets to a variety of problems, including the following question: For a given interest rate, how much does one need to deposit every year to accumulate two million dollars in the account at the time of retirement?

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Learning Goals

Students will:
  • Read about the Rule of 72 and build a spreadsheet to apply it.
  • Read about the future value of a present sum and build a spreadsheet that applies the equation for it to calculate the growth of a one-time investment.
  • Read about the future value of an annuity and build a spreadsheet that applies the equation for it to calculate the growth of an account into which one makes a regular deposit.
  • Calculate the amount of the annual deposit needed to retire with $2-million in the account.
In the process students will:
  • Learn how compound interest relates to doubling rate.
  • Learn how to benefit personally from exponential growth.
  • Learn the future value of disciplined savings.

Context for Use

This module can be used in a General Math course taken by non-technical majors needing to meet a 6 hour requirement.

Description and Teaching Materials

The module is a PowerPoint presentation with embedded spreadsheets. If the embedded spreadsheets are not visible, save the PowerPoint file to disk and open it from there.

The above PowerPoint files are the student version of the module. An instructor version is available by request. The instructor version includes the completed spreadsheet. Send your request to Len Vacher (vacher@usf.edu) by filling out and submitting the Instructor Module Request Form.

Teaching Notes and Tips

In this Spreadsheets Across the Curriculum activity, this module will motivate students to appreciate mathematical applications to real life experiences. Planning for retirement is easy when you know the basic mathematics involved in investment.

Assessment

A pre-test is given with the instructor version. Also, the end of module questions could be used for assessment.

References and Resources