Question

Nan and Neal are twins. Nan invests $5,000 at 7 percent at age 25. Neal Invests $5,000 at 7 percent at age 30. Both investments compound Interest annually. Both twins retire at age 60 and nelther adds nor withdraws funds prior to retirement. Which statement is correct? Multiple Choice
Nan will have less money when she reires than Neal.
Neal will earn more Interest on Interest than Nan.
Neal will earn more compound Interest than Nan.
If both Nan and Neal walt to age 70 to retire they will have equal amounts of savings
Nan will have more money than Neal at any age.

Answer 1

Answer:

Nan will have more money than Neal at any age.

Explanation:

There are 5 major key points that must be identified from the question:

1. Nan and Neal are twins: Hence they are same age

2. Nan invests at age 25: 5 years earlier than Neal who invest at 30

3. Both of them invests same amount at same interest rate

4. Both investment compounds annually

5. Both twins retire at age 60 and neither adds nor withdraws funds prior to retirement

From this key points, it is clear that with the 5 years investment gap, Nan will surely have more money than Neal at any point in time, since all the factors of investment for both are the same, with Nan having the advantage because of the early-bird factor. He would definitely have over 5000 dollars as at the time Neal would start, and Nan's value at the starting year of Neal, would be Neal's amount in 5 years time, and at that time, Nan would be ahead, since they both compound annually.