Save it somebody says Dont sell it Its not worth much now bu

“Save it,” somebody says. “Don’t sell it. It’s not worth much now, but in 20 years it will probably be worth five times as such.” Should you save it or sell it? What will $1 now be worth in 20 years if invested at the rate of interest currently obtainable from relatively risk-free loans? What would your advice be?

Solution

Let us suppose we invest x dollars, then if we don\'t invest in the plan

Using Compound Interest

Rate of Interest for risk free loans = 10% (Approximately)

A = P(1+r)^t

=> x(1+0.1)^(20)

=> x(1.1)^(20)

=> 6.727x

Hence the amount will become 6.727 times as that of 20 years before, hence we should sell the stock and invest the amount in the interest free loan in order to increase our amount