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Chapter 8 Project
Investing for College
For the average person, the key to saving enough for a college education is starting early, the earlier the better. This not only makes the time for saving longer but also takes better advantage of compounding interest.
There are special investment vehicles that allow tax-deferred saving such as Roth IRA’s and educational IRA’s that can be used for educational expenses after the account has been open for five successive tax years. These plans allow you to earn interest on money that would otherwise have been paid in taxes.
- Imagine that your parents established a savings account for you when you were born. They deposited $1500 with an interest rate of 3.54% compounded yearly. How much money will you have to further your education at age 18? Show your equation along with your answer.
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- Certificates of deposit (CD’s), which are guaranteed for a specific amount of time, generally offer a higher percentage rate than savings accounts. When you entered sixth grade, your parents opened a $2000 seven-year CD with 5.87% interest rate that is compounded yearly. How much would your balance be after high school graduation? Show your equation along with your answer.
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- Imagine that you could have the same percentage rate in your savings account that you had in your certificate of deposit. How much would your balance be at age 18? (Use your original $1500 deposit from Question 1.) Show your equation along with your answer.
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- Graph the exponential growth model in Question 1. Let the horizontal axis represent the number of years, with t = 0 being your birth year. Let the vertical axis represent the amount of money in the balance. Make a table of values (every 3 years to 18 years) using your exponential model. (Use the graph provided below.)
- Graph the exponential growth model in Question 2. Let the horizontal axis represent the number of years, with t = 0 being your birth year. Let the vertical axis represent the amount of money in the balance. Make a table of values using your exponential growth model for seven years. (Use the graph provided below.)
Chapter 8 Project Rubric
20 ptsStudent completes all parts of the questions accurately. Student correctly finds and shows an exponential growth model. Student makes a complete and accurate graph following given directions along with a table of values. All work is neat (no decorating) and supports answers.
15 pts.Student completes all parts of the question. Solutions, table of values, or graph may contain minor mathematical errors or misunderstandings. All work is neat (no decorating) and supports answers.
10 pts.Student attempts to complete all parts of the question including exponential growth model, table of values, graph and answer. Several mathematical errors may occur. Answers do no fit the exponential growth model.
5 ptsStudent’s work is very incomplete. Work is missing, very incomplete and/or messy.