Which of the following investments is larger after 22 years? by how much? A. $100 is...
Which of the following investments is larger after 22 years? by how much?
A. $100 is deposited monthly and earns 4.25% interest compounded monthly
B. $1250 is deposited annually and earns 4.25% interest compounded annually.
Homework Answers
Monthly rate of interest = 4.25%/12 = 0.35416%
Value of investment A after 22 years = 100*[{(1+0.35416%)264 – 1}/0.35416%]
= 43,568.21
Value of Investment B after 22 years = 1,250*[{(1.0425)22-1}0.0425]
= $44,072.52
Hence, investment B will be larger by $504.31
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