Data and Solutions

Chosen Solution: Invest starting $80 000 in 3-year GIC, put all earnings in stocks

Average outcome

With an average outcome, this solution gets us $2815.54 over our goal.

**Image 1** The table showing money in each category over time. The “0 years” row is where the portfolio starts.

**Image 2** The formula for each year for stocks, using the average increase in value of 7.5%/year. This is the average increase per year, in the past 5 years. Alternatively, we could take the 5th root of (1+[the increase in the past 5 years]) to find our “multiplier.” A 7.5% increase is equivalent to multiplying by 1.075.

**Image 3** The formula for the value of the money in the GIC each year. It’s worth noting that, in a GIC, the money can only be taken out at the end of the 3 years, without facing penalties.

**Image 4** A clustered column chart showing the amount of money in each category over time. In 3 years (yellow), the portfolio has $2815.54 more than the $120 000 goal.

Bad outcome

With a bad outcome, this solution still gets us $1267.53 over our goal.

**Image 1** The table showing money in each category over time.

**Image 2** During the second year, we assume the stocks have a “bad year” and drop in value by 6.9%, so we multiply by 1-0.069=0.931 that year.

**Image 3** During the third year, we assume the stocks have an “average” year and gain 7.5% value, so we multiply by 1+0.075=1.075 that year.

**Image 4** A clustered column chart showing the amount of money in each category over time. In 3 years (yellow), the portfolio has $1267.54 more than the $120 000 goal.

The calculations for the money earned in the 3-year GIC can be found in the work for the previous outcome.

Worst allowable outcome (formulas in cells omitted)

We account for a ~6.067% drop in the last year, and have only $0.38 extra! Better not drop a loonie on the ground; you’re going to need it!

Alternative solution 1: Invest $80 000 in 3-year GIC, invest all earnings in 1-year GIC

This solution gets us $1571.54 over our goal.

**Image 1** The table showing money in each category over time.

**Image 2** Calculations for each year for the 1-year GIC. The selected cell is E7. We multiply by 1.035 (earnings from investment) and add 10 000 (other earnings being added).

**Image 3** Calculations for each year for the 3-year GIC. The selected cell is F7.

**Image 4** A clustered column chart showing the amount of money in each category over time. In 3 years (yellow), the portfolio has $1571.54 more than the $120 000 goal.

Alternative solution 2: Invest everything in stocks (formulas in each cell omitted)

Average outcome

Bad outcome

Alternative solution 3: Invest $80 000 in 3-year GIC, put all earnings in savings (formulas in each cell omitted)

*I used MS Excel to create these visuals and work. This includes the charts, tables, and calculations for each plan, and some of the arithmetic when I found what the maximum loss could be in the second year (in the “worst allowable outcome” of the chosen solution).

Justification

My chosen solution is the most successful solution that I looked at, given an average outcome, that still met the $120 000 goal given a bad outcome. When I took the “quiz” to find my risk tolerance, I got a medium-high risk score. However, I don’t think that investing a lot of money in stocks is worth the risk when there is a bigger goal that must be reached. After that, I would be fine with taking more risks.

I chose to leave “savings” out of my chosen solution, since I find it quite unlikely that the stocks will lose money over 3 years. I used stocks instead of a lower-risk 1-year GIC in my chosen solution because stocks could, in theory, be sold off in case of an emergency, even if their value has temporarily gone down. On the other hand, I’d have to wait up to a year to take any money out of a 1-year GIC.

A weakness of my solution is that it isn’t quite as successful, on average, as it could be. I’m not sure if it’s a good idea to take too many risks with “the markets” these days, but still, putting more money into stocks could make more money. Another weakness could be the amount of money invested in stocks and the GIC. By investing my money this way, I wouldn’t be leaving a lot of money to use in case of emergency. Whereas all of my earnings can go into stocks, which can be sold fairly quickly if needed, they won’t necessarily sell for as high of a price as they would ideally. Also, the money in the 3-year GIC would be difficult to “take out.”

Collaboration and Contributions

I found working with my group to be more difficult than usual. We would often not understand what was being asked when it came to using the actual stock value changes each year.
I contributed to the group by suggesting different plans and calculating how much money each plan would make after 3 years. My group helped me understand what was being asked of us when we used the “actual” stock numbers.
I used the first solution our group came up with. I also looked at a few more options, one of which might have been our group’s.
I would rate myself as a 3/4 for collaborating with my group. I could demonstrate how to solve different problems involving compound interest and suggest good solutions for our main “problem” ($120 000 goal).

Core Competency Reflection

I can take on roles and responsibilities in a group; I do my share. I showed my group how to solve the different “introduction” problems in class. I also helped find the amount of money that our solutions earned.
I can form new ideas to create new things. I can also build on the ideas of others. For this project, I used a few “plans” that involved stocks. In this project, we were told to use an average outcome, and a “bad” outcome to give ourselves a “range.” I also wanted to find out exactly how poorly the markets could perform without preventing a “plan” from reaching $120 000. I used algebra to solve for the “missing percentages” and showed how this resulted in the amount of money being “over” by under 1 dollar in both plans/outcomes.
Examples of where I communicate clearly and purposefully can be seen in the tables and charts that I made in this project. I used the individual columns in each category as well as “Total” and “Extra” sections to show how much money is in each section of the portfolio, how much money is in the portfolio in total, and how much extra money we are left with. I also used screenshots to show my work and how I used Excel to put it to use.
An example of something I have spent a lot of time learning about it using Excel for “finance-related” assignments, projects, and other work. In Grade 7, we learned about how to use Excel to create a fairly simple financial plan for ourselves, including our jobs and costs of school and life. I also spent some time learning about stocks, and working with one stock in particular with Excel to find different outcomes.