Financial Goals For Retirement – Capital Preservation And Appreciation

Question 1 . 

Stock market is defined as a place where investors trade bonds securities and shares determined by the demand. The stock market is usually maintained and given license to operate by the S&P Dow Jones Indices acting as a benchmark for various investment (Jones & Dow, 2011) . The S&P keeps track of 500 publically traded companies while the DOW Jones only tracks 30 companies. The S&P DOW Jones indices are calculated using multiple methodologies which determines the price of the stock (Low,2012) . They are price weighted, equal weighted, leveraged, dividend and weighted return indices among others . 

Question 2. 

In a bank’s savings account the interest rates vary from o.5% to 2% depending on the bank you are saving at. According to Barclays Bank of America, they have a current interest rate of 1%-1.05 depending on the trends. If you keep 20,000 in Barclays bank an assuming the interest rates are 1% per month using the formula of compound interest P(1+R%)^NT where P is the principle or the initial deposit, R is the rate, T is the time, and N is the number of months. Assuming the interest rate remains 1% when we use this formula the math will be 

20,000(1+1/100)^12*20= 450730.01205279 

In S&P Jones Using the PI and PF in the excel data given (Finance.yahoo.com, 2018) to calculate rate. Where P1 is the initial price, and PF is the final price thus P1 close is 329.08 and Pf is 2238.83 thus the interest rate is 6.8% thus the compounded interest is p(1+r%)^NT and the calculation will be 

20,000(1+6.8/100)^12*20=880,0876.4 

My preferred saving account would be S&P500 since the interest rates are not constant and increase over a period of time. 

References 

Jones, Thomas Dow. (2011).  Benezit Dictionary of Artists .doi:10.1093/benz/9780199773787.article.b00095605 

Low, Y. L. (2012). The Option-Implied Density of the S&P500: What Drives MarketUncertainty and Prediction?  SSRN Electronic Journal . doi:10.2139/ssrn.2154749 

Yahoo Finance - Business Finance, Stock Market, Quotes, News. (n.d.). Retrieved fromhttps://finance.yahoo.com