Question #2b3b9

1 Answer
Jan 11, 2018

a) Lola will have #$49.50# less than Anna when they both turn on #65# years . b) Lola need to invest #$217.34# to be worth same amount as Anne's.

Explanation:

Anne:
#P=$200 ; r=3/100=$0.03#/year compounded monthly

#:.n=12# ; Period is #t= 65-27=38# year. Total yield after

#38# years is #A= P(1+r/n)^(nt)=200(1+0.03/12)^(12*38)# or

#A= 200(1.0025)^456~~ $624.45#

Lola:
#P=$200 ; r=4.6/100=$0.046#/year compounded monthly

#:.n=12# ; Period is #t= 65-42=23# year. Total yield after

#23# years is #A= P(1+r/n)^(nt)=200(1+0.046/12)^(12*23)# or

#A= 200(1.003833)^276~~ $574.96#

Lola will have #624.45-574.96=$49.50# less than Anna when

they both turn on #65# years.

To earn # $624.45# on completion of #23# years Lola has to

invest #P= A/(1+r/n)^(nt) # or

#P=624.45/( 1+0.046/12)^(12*23)# or

#P=624.45/( 1.003833)^276~~$217.34#

Lola need to invest #$217.34# to be worth sama amount as

Anne's. [Ans]