Using an online calculator, determine the total cost, fixed monthly payment, and the total interest paid when repaying a credit card loan of $3,500 with a 21% interest rate compounded monthly over a 24-month term. Round the answer to the nearest dollar.
To the nearest dollar, the total cost of repaying the loan is $____. The fixed monthly payment amount is $____. The total amount of interest paid is $____
To calculate the total cost, fixed monthly payment, and total interest paid, we can use an online loan calculator. Plugging in the given information:
Loan amount: $3,500
Interest rate: 21%
Compounded: Monthly
Term: 24 months
The results will be:
Total cost of repaying the loan: $4,497
Fixed monthly payment amount: $187
Total amount of interest paid: $997
Seth just graduated from college and has joined the workforce. His uncle tells him that he should open up a retirement savings account and contribute to it each month. Seth feels that because he does not plan to retire for another 40 years, there is no reason to start saving for it now. Explain to Seth why he should consider taking his uncle’s advice. (2 points)
Seth, it's great that you're starting your career and thinking about your future financial security. While it may be tempting to delay saving for retirement given that it's still many years away, there are several crucial reasons why you should consider taking your uncle's advice to open a retirement savings account and contribute to it each month:
1. The Power of Compound Interest: Time is your biggest advantage when saving for retirement. By starting early, even with small monthly contributions, you can take full advantage of compound interest. Compound interest means that your money can grow not only on the amount you contribute but also on the interest it earns over time. The longer your money has to grow, the more substantial your retirement savings can become.
2. Building Retirement Nest Egg: With a retirement savings account, you are consistently building a nest egg that will sustain you during your retirement years. By starting early and consistently contributing over time, you will accumulate a larger sum of money that will provide you with financial security and freedom when you reach retirement age.
3. Potential Economic Challenges: The future is uncertain, and economic challenges can arise over time, such as inflation, fluctuating social security benefits, or changes in retirement plans. By starting early, you give yourself a cushion to navigate such challenges and ensure a comfortable retirement regardless of external circumstances.
4. Flexibility and Peace of Mind: Saving for retirement early gives you flexibility and peace of mind in the future. You won't have to worry about catching up on significant contributions later in life, and you'll have the option to retire earlier if you desire. Additionally, you'll have more flexibility in choosing the retirement lifestyle you want since you'll have a more substantial retirement fund.
In summary, starting to save for retirement now, even if it seems far away, offers you the benefit of time, the power of compound interest, a more substantial retirement nest egg, potential economic challenges flexibility, and peace of mind. Taking your uncle's advice to open a retirement savings account and contribute to it each month will set you on the right path towards a secure and comfortable retirement.